Within the Keynesian Model, If the Marginal Propensity to Consume

question 25

Multiple Choice

Within the Keynesian model, if the marginal propensity to consume is 0.8, which of the following is true?

• A) When consumption increases by $5, income increases by $1.
• B) When consumption increases by $1, saving increases by $5.
• C) When investment increases by $1, income increases by $5.
• D) When investment increases by $1, saving increases by $5.

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Definitions:

Goodwill

An intangible asset representing the excess value of a company over its tangible assets and liabilities, often arising from acquisitions.

Acquisition

The process of obtaining control of another company by purchasing its stock or assets.

Fair Value

The fair market price of an asset, reflecting its current value under normal market conditions.

Excess Land Allocation

The process of assigning a portion of the purchase price of a combined investment in land and building to the land, often when the portion allocated is above the fair value.