If the Simple Spending Multiplier Is 8, the Marginal Propensity

question 64

Multiple Choice

If the simple spending multiplier is 8, the marginal propensity to consume (MPC) is _____

• A) 1/8.
• B) 1/4.
• C) 4/5.
• D) 7/8.
• E) 8.

---

Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, without having control or joint control over those policies.

Cost Method

An accounting approach used for investments, where the investment is recorded at its acquisition cost and adjustments are made for dividends received and permanent declines in value.

Equity Method

An accounting technique used when a company invests in a firm and has significant influence over it, recognizing its share of profit or loss in its own financial statements.

Significant Influence

Refers to the power to participate in the financial and operating policy decisions of an investee but is not control over those policies.