If the Marginal Propensity to Consume Is 0

question 215

Multiple Choice

If the marginal propensity to consume is 0.75 and government purchases of goods and services decrease by $30 billion, real GDP will:

• A)increase by $30 billion.
• B)increase by $22.5 billion.
• C)decrease by $30 billion.
• D)decrease by $120 billion.

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Definitions:

Preferred Dividends

Preferred dividends are payments made to preferred shareholders before any dividends are paid to common shareholders, usually fixed and based on a percentage of the par value of the shares.

Accounts Receivable Turnover

A financial ratio indicating how many times a company collects its average accounts receivable balance in a period.

Net Sales

The total revenue from sales of goods and services, after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Net Accounts Receivable

The total amount of money owed to a company by its customers minus the portion expected to be uncollectible.