For a Marginal Propensity to Consume of 0

question 55

Multiple Choice

For a marginal propensity to consume of 0.9, the multiplier effect of an increase of $100 billion in government purchases of goods and services is larger than the multiplier effect of a tax cut of $100 billion because:

• A)the government pays a higher price than households for the same goods and services.
• B)production of the goods and services the government purchases has a bigger impact on real GDP than production of consumer goods.
• C)many households fail to file their income tax and claim their refund.
• D)in the first round of spending only $90 billion of the tax cut will be spent and $10 billion will be saved, while the entire $100 billion of government purchases will be spent.

---

Definitions:

Rows and Columns

The horizontal rows and vertical columns in a table or spreadsheet that organize data systematically.

Sexual Reproduction

A biological process resulting in the creation of new organisms through the combination of genetic materials from two parents.

Genetic Traits

Characteristics that are influenced by genes inherited from one's parents, including physical appearance, behavior, and risk for certain diseases.

Tissue Differentiation

The process by which unspecialized cells develop into their mature form and function.