The Income-Expenditure Model Predicts That If the Marginal Propensity to Consume

question 271

Multiple Choice

The income-expenditure model predicts that if the marginal propensity to consume is 0.8 and the federal government decreases spending by $200 billion, real GDP will fall by:

• A)$160 billion.
• B)$200 billion.
• C)$800 billion.
• D)$1,000 billion.

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Definitions:

Sales And Excise Taxes

Taxes placed on the sale or manufacture of goods and services, collected by the government.

Products

Goods or services that are created through a process and offered in the market to satisfy customer needs or desires.

Tax Level

The rate at which income, goods, services, or transactions are taxed by governments, influencing economic behaviors and revenue.

Sales And Excise Taxes

Taxes imposed by governments on the sale of goods and services, with excise taxes being specialized taxes on specific goods.