A Tax-Cut Will Have a Greater Effect on Equilibrium GDP

question 95

Multiple Choice

A tax-cut will have a greater effect on equilibrium GDP if the:

• A) Marginal propensity to consume is smaller
• B) Marginal propensity to save is smaller
• C) Marginal propensity to save is larger
• D) Average propensity to consume is larger

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Definitions:

Real Numbers

The set of all rational and irrational numbers, including all numbers that can be written as a decimal.

Associative Property

A mathematical principle stating that the way in which terms are grouped in an operation (addition or multiplication) does not change the result.

Addition

The mathematical operation that combines two or more quantities into a single sum.

Commutative Property

A fundamental property of addition and multiplication that states the order of the operands does not change the result, expressed as a+b=b+a or ab=ba.