If Consumption Decreases from $600 Billion to $575 Billion and the Marginal

question 207

Multiple Choice

If consumption decreases from $600 billion to $575 billion and the marginal propensity to consume is 0.8, then equilibrium income will:

• A) fall by $25 billion.
• B) fall by $125 billion.
• C) rise by $25 billion.
• D) rise by $125 billion.

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Definitions:

Contribution Margins

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Labour Hours

The total number of hours worked by employees, used for measuring productivity or calculating costs.

Product Mix

The variety of products that a company offers for sale, which can affect its market position and profitability.

Predatory Pricing

The strategy of setting prices at an extremely low level with the intent to eliminate competition, often considered anti-competitive and illegal under antitrust laws.