Use the Table Below to Determine the Impact on Consumption

question 26

Multiple Choice

Use the table below to determine the impact on consumption spending of a $100 increase in net taxes.

• A) Consumption will decrease by $80.
• B) Consumption will increase by $80.
• C) The marginal propensity to consume will increase to .91.
• D) The marginal propensity to consume will decrease to .73.
• E) The change in net taxes will not change consumption.

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, entitling holders to vote on corporate matters.

Shares Issued

Refers to the total number of shares that a company has allocated to shareholders as part of its capital structure, including those owned by the public and the company itself.

Par Common Stock

The nominal or face value of a share of common stock, as stated in the corporate charter, which has minimal effect on its market value.

Market Value

The existing rate at which a service or asset is available for purchase or sale on the marketplace.