Assume the Marginal Propensity to Consume (MPC) Is 0

question 8

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.8 and there is a $200 billion increase in government purchases in an economy, other things constant. In the first round of induced additional consumption, consumption expenditures will increase by:

• A)$80 billion.
• B)$160 billion.
• C)$200 billion.
• D)$800 billion.
• E)$280 billion

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Definitions:

Utility

represents the total satisfaction received from consuming a good or service.

Total Utility

The overall satisfaction or fulfillment that a consumer receives from consuming a particular quantity of goods or services.

T-Shirts

A type of clothing characterized by short sleeves and typically made of cotton fabric.

Coffee

A brewed drink prepared from roasted coffee beans, the seeds of berries from certain Coffea species.