If the Marginal Propensity to Consume (MPC)is 0

question 36

Multiple Choice

If the marginal propensity to consume (MPC) is 0.75 and there is an increase in planned investment spending of $0.5 trillion, then saving will

• A)increase by $0.25 trillion.
• B)increase by $0.5 trillion.
• C)increase by $1 trillion.
• D)remain unchanged.

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Definitions:

Survivorship Bias

The logical error of focusing on instances that survived a selection process and overlooking those that did not because of their lack of visibility.

Backfill Bias

A bias that can occur when historical performances of investment portfolios are artificially inflated because only successful funds are reported or included in analyses.

Incentive Bias

A psychological lean or predisposition towards certain decisions or actions due to promised rewards or incentives.

Survivorship Bias

The error of focusing on the successes or survivors in a group and overlooking those that failed, which can lead to overly optimistic beliefs or conclusions.