If the Consumption Function Is Defined as C = 5,500

question 191

Multiple Choice

If the consumption function is defined as C = 5,500 + 0.9Y,what is the marginal propensity to consume?

• A)0.1
• B)0.9
• C)5.5
• D)6.1

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Definitions:

MACRS

Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes in the United States that allows faster write-offs of assets.

Straight-Line

A method of calculating depreciation of an asset, which allocates an equal amount of depreciation to each year of the asset's useful life.

Sum-Of-Years' Digits

A depreciation method that accelerates the expense recognition, using a decreasing fraction of years remaining over the sum of the years' digits.

Double-Declining Balance

A method of accelerated depreciation which doubles the normal depreciation rate, reducing the asset's book value more quickly in its early years.