An Increase in the Marginal Propensity to Save from

question 52

Multiple Choice

An increase in the marginal propensity to save from .1 to .2 will cause

• A)an increase in the multiplier and a given change in autonomous consumption (c₀)to have a smaller effect on output.
• B)an increase in the multiplier and a given change in autonomous consumption (c₀)to have a larger effect on output.
• C)a reduction in the multiplier and a given change in autonomous consumption (c₀)to have a smaller effect on output.
• D)a reduction in the multiplier and a given change in autonomous consumption (c₀)to have a larger effect on output.

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Definitions:

Residual Profits

Profits remaining after all costs, including capital costs such as interest on loan capital and equity capital, have been deducted.

Common Stock

Represents ownership shares in a corporation, granting holders voting rights and a share in the company's profits via dividends.

Lease Residual

The estimated value of a leased asset at the end of the lease term, important for setting lease payments and determining buyout options.