If an Economy's MPC Is 0

question 299

Multiple Choice

If an economy's MPC is 0.75 and the MPM is 0.25, then an increase in government spending of $2,000 will increase income by

• A) $2,100.
• B) $3,000.
• C) $4,000.
• D) $8,000.

---

Definitions:

Cost-Volume-Profit

An accounting method used to determine the effects of changes in costs and volume on a company's profits.

Marginal Analysis

An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Price-Setting Process

The method by which a company determines the selling price of its products or services, involving cost analysis, market demand, and competitor pricing strategies.

Aggressive Competition

A market situation characterized by businesses actively seeking to attract customers by using assertive tactics beyond typical marketing and advertising strategies.