If the Marginal Propensity to Consume Is 0

question 90

Multiple Choice

If the marginal propensity to consume is 0.85 and there are no imports or income taxes,the expenditure multiplier is equal to

• A)1 - 0.85 = 0.15.
• B)0.85 × the change in autonomous expenditure.
• C)1 ÷ (1 - 0.85)= 1 ÷ 0.15 = 1.45.
• D)1 ÷ 0.85 = 1.176.
• E)0.85 ÷ 1 = 0.85.

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Definitions:

Downstream Transactions

Transactions where a parent company sells to, buys from, or otherwise transacts with its subsidiary, affecting the financial statements of both entities.

Gross Profit Percentage

A financial metric that indicates the portion of revenue that exceeds the cost of goods sold, expressed as a percentage.

Non-Controlling Interest

The portion of equity interest in a subsidiary not attributable to the parent company, representing minority shareholders' claim on assets and earnings.

Intercompany Gain

Profit derived from transactions between subsidiaries or divisions of the same company.