If a Household's Income Falls from $20,000 to $17,000 and Its

question 34

Multiple Choice

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000,then its

• A)marginal propensity to consume is -0.67
• B)marginal propensity to consume is 0.88
• C)marginal propensity to consume is 0.20
• D)marginal propensity to save is zero
• E)marginal propensity to save is 0.12

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Definitions:

Association

An organized group of people who share a common interest, purpose, or profession.

Causation

A relationship where one event (the cause) directly leads to the occurrence of another event (the effect).

Ceteris Paribus

A Latin term used in economics to mean "all other things being equal," isolating one economic variable to analyze its effect.

Normative Economics

A branch of economics that expresses value judgments about economic fairness or what the economy ought to be like, focusing on policy prescriptions and outcomes.