Assume That the Marginal Propensity to Consume Equals 0

question 64

Multiple Choice

Assume that the marginal propensity to consume equals 0.8,the income tax rate equals 0.3,and the marginal propensity to import equals 0.2.The marginal leakage rate is ________ and the size of the multiplier is ________.

• A)0.70;3.33
• B)0.60;2.5
• C)0.64;1.56
• D)0.50;2.0

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Definitions:

External Transaction

A financial event involving an exchange between the business and another entity outside of the company.

Accounting Equation

The foundation of double-entry bookkeeping, represented as Assets = Liabilities + Equity.

Equity

The value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debts were paid off.

Stockholders

Stockholders, also known as shareholders, are individuals or entities that own one or more shares of stock in a public or private corporation, giving them ownership interests.