If the MPC Is 0

question 127

Multiple Choice

If the MPC is 0.95, then a $12 million increase in disposable income will:

• A)increase saving by $11.4 million.
• B)increase saving by $0.6 million.
• C)increase consumption by $6 million.
• D)increase consumption by $950 million.

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Definitions:

Total Current Assets

The sum of all assets expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Written off Accounts

Accounts deemed uncollectible and therefore removed from the accounts receivable balance in the financial statements.

Allowance for Doubtful Accounts

An estimate of the receivables that may not be collected, reducing gross receivables to a more realistic net value.