If the Average Propensity to Consume Is Initially 0

question 107

Multiple Choice

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the new value of saving is

• A)$200.
• B)$250.
• C)$800.
• D)$750.

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Definitions:

Disbursement Float

The time lag between when a payment is made by writing a check and when the funds are actually removed from the payer's account.

Float Costs

The expenses associated with issuing new stocks or bonds, including underwriting, legal, and registration fees.

Optimal Cash Balance

The ideal amount of cash a company should hold to minimize both holding costs and transaction costs.

Float Cost Impact

The effect of delayed checks or securities settlements on the use of funds, which can affect a company's cash flow.