If the Marginal Propensity to Consume Is 0

question 292

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 ÷ 0.85 = 1.176.
• D) 1 ÷ (1 - 0.85) = 1 ÷ 0.15 = 1.45.
• E) 0.85 ÷ 1 = 0.85.

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Definitions:

Operating Cost

Costs incurred from the regular functioning of a company, encompassing lease payments, utility bills, and employee salaries.

Value-based Pricing

Pricing strategy based on the perceived value of a product or service to the customer rather than the cost of the product or competition prices.

Operating Costs

Costs incurred from routine operations of a company, not including expenses tied to manufacturing.

Economic Value

A measure of the benefit provided by a good or service to an economic agent, often quantified in terms of willingness to pay or the amount of resources saved.