Suppose the Consumption Function Is Given by the Equation C

question 89

Multiple Choice

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

• A) 0.2
• B) 0.8
• C) 2.0
• D) 100

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Definitions:

Financing Activities

Activities that result in changes in the size and composition of the equity and borrowings of a company.

Inventory Account

An account on the balance sheet that reports the value of a company's goods that are unsold at the end of the accounting period.

Indirect Method

A method used in cash flow statements to convert net income into net cash flow from operating activities, by adjusting for non-cash transactions.

Cash Dividends

Profits paid out to shareholders by a corporation from its earnings in the form of cash.