The Amount by Which Consumption Increases When After-Tax Income Increases

question 28

Multiple Choice

The amount by which consumption increases when after-tax income increases by $1 is called the:

• A) marginal propensity to consume.
• B) marginal consumption revenue.
• C) variable propensity to consume.
• D) consumption multiplier effect.

---

Definitions:

Money Supply

The collective sum of money in an economy, taking into account cash, coins, and balances within checking and savings accounts, at a specific timeframe.

Expansionary Monetary Policy

A policy by central banks to increase the money supply in order to stimulate economic growth.

Interest Rates

Interest rates are the cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal amount per annum.

Economic Thought

The study and contemplation of various theories, models, and approaches regarding the functioning of economies and economic behavior.