If the MPC Equals 0

question 22

Multiple Choice

If the MPC equals 0.75 and the proportional income tax rate is 0.2, the spending multiplier equals

• A)3
• B)2.5
• C)16/13
• D)1
• E)4

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Definitions:

Discourage

To dissuade or deter someone from doing something through persuasion or by creating doubts or fears.

Maintain

To keep something in an existing state or condition, preventing it from deteriorating or ensuring its continual effectiveness.

Avoid

To deliberately stay away from or prevent an event or situation from happening.

One-Upmanship

The practice of gaining a competitive advantage or superiority over others, often through clever but sometimes dubious means.