If the Marginal Propensity to Consume Is 0

question 9

Multiple Choice

If the marginal propensity to consume is 0.6,a $1.2 billion increase in intended investment will increase equilibrium GDP by ________ billion.

• A) $0.4
• B) $0.6
• C) $1.2
• D) $2.5
• E) $3

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Definitions:

Fair Value Adjustment

An accounting process to adjust the book value of an asset or liability to reflect its current market value.

Long-Term Investment

assets purchased by a company that are intended to be held for more than one year, such as stocks, bonds, or real estate.

Realized Gain

The profit earned from selling an asset for more than its purchase price, recognizable when the transaction is completed.

Trading Investments

Assets acquired primarily for selling in the near term to generate profit from short-term price fluctuations.