Suppose a Certain Economy's Consumption Function Is Where

question 93

Multiple Choice

Suppose a certain economy's consumption function is where and are measured in billions of dollars. Find the marginal propensity to consume (the rate of change of consumption with respect to income, ) when . R

• A) $4.98 billion/billion dollars
• B) $1.21 billion/billion dollars
• C) $2.51 billion/billion dollars
• D) $3.54 billion/billion dollars

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Definitions:

Hybrid Security

A financial instrument that combines characteristics of both equity and debt, often providing fixed income or dividends as well as the potential for capital appreciation.

Equity

An ownership interest. The portion of a firm’s capital representing funds belonging to its shareholders. An equity investment is an investment in stock.

Capital Components

The various sources of funding that a company uses to finance its operations and growth, including debt and equity.

Capital Structure

The mix of the three capital components (debt, preferred stock, and equity) used by a firm. The optimal capital structure is the structure at which stock price is maximized, all other things held equal. Also see Target capital structure.