Suppose Consumer Confidence Declines and as a Result,consumer Spending Decreases

question 5

Multiple Choice

Suppose consumer confidence declines and as a result,consumer spending decreases by $4 billion dollars.Other things equal,if households spend $0.75 of each extra dollar of income and save the remaining $0.25,by how much will spending decrease during the first round through the circular flow?

• A) $1 billion
• B) $2.25 billion
• C) $3 billion
• D) $4 billion

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Definitions:

Normally Distributed

Referring to a distribution that follows a normal curve, characterized by its bell shape and defined by its mean and standard deviation.

Ordinal Data

A type of categorical data in which the order or ranking of the values is significant, but the difference between those values is not necessarily consistent or defined.

Interval Data

A type of quantitative data in which the intervals between values are meaningful and consistent, but there is no true zero point, allowing for the measurement of difference and comparison.

Validity

The extent to which a test, measurement, or study accurately reflects or assesses the specific concept it is intended to measure.