If the Marginal Propensity to Consume Is Equal to 0

question 50

Multiple Choice

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy,then consumption spending will increase by:

• A)$6 billion.
• B)$14 billion.
• C)$20 billion.
• D)$28 billion.
• E)$67 billion.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for monetary policy.

President and Congress

The branches of the United States government responsible for executing and creating laws, respectively, that govern the country.

American People

Citizens or residents of the United States of America.

Economic Expansion

A phase of the business cycle when the economy grows, characterized by increasing employment, economic output, and consumer spending.