Assume Autonomous Net Taxes Rise by $400, and the Marginal

question 77

Multiple Choice

Assume autonomous net taxes rise by $400, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will consumption initially change?  

• A) It will fall by $400. 
• B) It will rise by $400. 
• C) It will fall by $300. 
• D) It will rise by $300.

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Definitions:

Average Investment

An approach for calculating the mean amount invested over a particular period, considering both the initial and final investment levels.

Present Value Index

The present value index is a ratio used to determine the present value of future cash flows relative to the initial investment cost.

Net Present Value Analysis

A method used in capital budgeting to evaluate the profitability of an investment, calculating the present value of expected cash flows less the initial investment.

Capital Investment

Capital investment denotes funds invested in a company or enterprise for the purpose of furthering its business objectives, such as purchasing machinery or buildings.