If the Marginal Propensity to Consume Is 0

question 79

Multiple Choice

If the marginal propensity to consume is 0.75 and transfer payments increase by $30 billion, real GDP will:

• A)increase by exactly $30 billion.
• B)decrease by exactly $30 billion.
• C)increase by more than $120 billion.
• D)increase by less than $120 billion.

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Definitions:

Guaranteed Rate

A fixed interest rate assured by a lender or issuer for a specified period.

Discount Factor

A multiplier used to determine the present value of future cash flows or investments.

Working Capital

The measure of a company's short-term financial health and operational efficiency, calculated as current assets minus current liabilities.

Cash Inflow

The total amount of money being transferred into a company, typically measured over a specific period of time.