A Decrease in Transfer Payments Will Have a Smaller Effect

question 71

Multiple Choice

A decrease in transfer payments will have a smaller effect on aggregate demand the:

• A)larger the marginal propensity to consume.
• B)larger the average propensity to consume.
• C)larger the marginal propensity to save.
• D)larger the average propensity to save.

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Definitions:

Average Collection Period

The mean period it takes for an enterprise to collect payments due from its clients.

Financial Statements

Official records that detail a company’s financial activities and condition, including balance sheet, income statement, and cash flow statement.

Stock Market

A marketplace where stocks (shares in corporations) are bought and sold, providing companies with access to capital and investors with a slice of ownership and potential profits.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets.