The Fraction of an Increase in Income That Is Saved

question 27

Multiple Choice

The fraction of an increase in income that is saved is referred to as the

• A)marginal propensity to save
• B)average propensity to save
• C)marginal propensity to consume
• D)average propensity to consume
• E)saving-consumption ratio (i.e.,saving divided by consumption spending)

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Definitions:

Equilibrium Quantity

The quantity of goods or services demanded equals the quantity supplied at the market price, resulting in market equilibrium.

Excise Tax

A tax levied on the sale of specific goods and services, such as tobacco, alcohol, and fuel.

Levied

Imposed or collected (usually a tax, fine, or other charge) by authority or force.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.