Suppose That the Marginal Propensity to Consume (MPC) Is

question 438

Multiple Choice

Suppose that the marginal propensity to consume (MPC) is .8 and there is an increase in investment spending of $100,000. As a result, equilibrium real Gross Domestic Product (GDP) would increase by

• A) $20,000.
• B) $100,000.
• C) $500,000.
• D) $800,000.

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Definitions:

Quality of Income Ratio

A financial metric that assesses the ability of a company to translate its earnings into cash, providing insight into financial health and operational efficiency.

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business, used to assess the company's liquidity, financial flexibility, and overall financial health.

Interest Expense

Costs incurred by an entity for borrowed funds, typically presented as a line item on the income statement.