The Marginal Propensity to Consume Is

question 136

Multiple Choice

The marginal propensity to consume is:

• A) normally expected to be between zero and one.
• B) equal to consumption divided by disposable income.
• C) normally assumed to decrease as disposable income increases.
• D) normally assumed to increase as disposable income increases.

---

Definitions:

Demand for Investment

The amount of spending on investment goods, such as machinery and buildings, that businesses and governments are willing to undertake at various interest rates.

Government Budget Deficit

The financial situation that occurs when a government spends more money than it receives in revenue over a given fiscal period.

Interest Rate

The number of dollars earned per dollar invested per period.

Real Rate

The rate of interest an investor expects to receive after allowing for inflation, reflecting the true cost of borrowing and the true yield on investments.