If the Marginal Propensity to Consume Is 0

question 14

Multiple Choice

If the marginal propensity to consume is 0.6,what is the value of the expenditure multiplier?

• A) 1.0
• B) 1.6
• C) 2.0
• D) 2.5
• E) 6.0

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Definitions:

Net Income

The net income of a business following the deduction of all expenditures and taxes from its total revenue.

Owners' Equity

The residual interest in the assets of a company after deducting liabilities, representing what the owners own outright.

Investment

The process of distributing funds with the goal of earning revenue or gains.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets.