If the Marginal Propensity to Consumer Is 0

question 5

Multiple Choice

If the marginal propensity to consumer is 0.8, the spending multiplier must be:

• A) 5
• B) 2
• C) 1.2
• D) 1.8

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Definitions:

Cash Account

A cash account is a brokerage account that requires the investor to pay the full amount for securities purchased and to receive full delivery of the securities sold.

Two-Column Journal

A fundamental accounting record with two columns used for debits and credits to record financial transactions.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account. It is positioned on the left side of an account ledger.

Credit

An accounting entry that increases the balance of liabilities and equity accounts or decreases the balance of an asset or expense account.