Suppose the Marginal Propensity to Consume Is 0

question 128

Multiple Choice

Suppose the marginal propensity to consume is 0.63, the marginal propensity to import equals 0.08, and personal income taxes amount to 9 percent of GDP. The spending multiplier for this economy is equal to _____.

• A) 0.54
• B) 0.80
• C) 1.25
• D) 1.41
• E) 1.85

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Definitions:

Slightly Elastic

Slightly elastic refers to a situation where a small change in price leads to a relatively small change in the quantity demanded or supplied.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating its sensitivity to price changes.

Total Revenue

The total amount of money generated by the sale of goods or services related to the company's primary operations.

Elastic

Describes a situation where the demand or supply for a good or service significantly changes in response to a change in price.