A Given Change in Disposable Income Would Have the Smallest

question 50

Multiple Choice

A given change in disposable income would have the smallest effect on aggregate demand with which of the following marginal propensities to consume?

• A) 0.2
• B) 0.4
• C) 0.6
• D) 0.8

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Definitions:

Diminishing Returns

The principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Negative Returns

A situation in which a business or investment loses more money than it earns or generates in revenue.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as materials and labor.

Shut Down

A shut down refers to a temporary or permanent cessation of operations, typically due to economic conditions or strategic decisions.