If the Marginal Propensity to Consume Is 0

question 341

Multiple Choice

If the marginal propensity to consume is 0.8,every $10 increase in disposable income increases

• A) consumption expenditure by $0.80.
• B) consumption expenditure by $18.00.
• C) saving by $0.20.
• D) consumption expenditure by $8.00.

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Definitions:

Net Present Value

A financial metric that calculates the value of a series of cash flows by discounting them to their present value, used to assess the profitability of investments.

Cost of Capital

The return rate that a firm needs to achieve to cover the cost of generating funds in the marketplace, essentially what it must pay in order to use capital.

Living Standards

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or geographic area.

GDP Growth

An increase in a country's gross domestic product over time, indicating economic expansion.