Suppose the Marginal Propensity to Consume Is 0

question 283

Multiple Choice

Suppose the marginal propensity to consume is 0.8 and the government cuts taxes by $40 billion. Real GDP will _____ by _____.

• A)increase; $200 billion
• B)decrease; $200 billion
• C)increase; $160 billion
• D)decrease; $160 billion

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Definitions:

Gross Profit

The financial metric representing the difference between revenue and the cost of goods sold, indicating how efficiently a company is producing its goods.

Cost Flow Assumption

A method of accounting designated to assess inventory worth and calculate the cost of goods sold, which can be either FIFO (First-In, First-Out) or LIFO (Last-In, First-Out).

Physical Flow of Goods

Refers to the actual movement of goods through the production process to the customer, distinct from the accounting or paper flow.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a dataset, assigning weights to each number based on its significance.