If the Marginal Propensity to Consume Equals 0

question 86

Multiple Choice

If the marginal propensity to consume equals 0.75, then a $100 increase in after-tax disposable income leads to a ______ increase in consumption.

• A) $13.33
• B) $25
• C) $75
• D) $133

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Definitions:

Expected Return

The expected profit from an investment, calculated by considering the likelihood of various potential results.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 means the stock is more volatile than the market, while a beta below 1 means it is less volatile.

CAPM

The Capital Asset Pricing Model, a theory used to determine the expected return on investment based on its inherent risk and the cost of capital.

Expected Return

The anticipated profit or loss from an investment based on its potential risks and rewards.