If Autonomous Investment Spending Falls by $1,000 and the Marginal

question 223

Multiple Choice

If autonomous investment spending falls by $1,000 and the marginal propensity to consume is 0.75, the total effect on the economy is a decrease of _____ in income or output.

• A) $750
• B) $1,000
• C) $4,000
• D) $7,500

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Definitions:

Equity

The value of an ownership interest in a firm, including stocks and retained earnings, representing the residual assets after deducting liabilities.

Investing Activities

Financial transactions and events related to acquiring or disposing of assets, such as the purchase or sale of equipment or securities, reflected in the cash flow statement.

Statement

A written or digital document that records the details of a particular financial or operational activity within a specific period.

Cash Flows

The inflows and outflows of cash and cash equivalents, representing the operational, investing, and financing activities of a business.