If the Average Propensity to Consume Is 1

question 230

Multiple Choice

If the average propensity to consume is 1.0, the marginal propensity to consume is 0.6, and real disposable income increases by $100, the additional saving is

• A) $0.
• B) $40.
• C) $60.
• D) $100.

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Definitions:

Consumer Surplus

The difference between the total amount consumers are willing to pay for a product or service and the total amount they actually pay.

Trade Restrictions

Regulations and policies that governments enact to control the free trade and exchange of goods and services across borders.

Import Quota

A restriction enforced by the government on the volume or price of merchandise that may be imported into a country.

Tariff

A tariff is a tax imposed by a government on imported or exported goods to regulate trade, often to protect domestic industries.