Suppose the marginal propensity to consume is 0.75. What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?
What will be an ideal response?
A marginal propensity to consume of 0.75 means that a consumer will increase real consumption spending $75 for every $100 increase in real disposable income. Since a person either consumes or saves real disposable income, the marginal propensity to save must be 0.25. We do not know what the average propensity to consume is. It depends on the level of real disposable income.
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In a recession, which unemployment rate is the highest?
A) the U-1 unemployment rate B) the U-6 unemployment rate C) the U-2 unemployment rate D) the U-3 unemployment rate E) None of the above answers is correct because the highest unemployment rate changes from one recession to the next.
Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA = 10 - QA, and the inverse demand curve for group B is PB = 18 - QB
The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, the profit maximizing prices charged to each type of customer are A) PA = 6, and PB = 10. B) PA = 4 and PB = 8. C) PA = 10, and PB = 6. D) PA = 8, and PB = 4.
Quotas are a greater threat to competition than tariffs because
A. Quotas allow imports but only at a higher price. B. Quotas preclude additional imports at any price. C. Tariffs do not reduce the quantity sold and quotas do. D. Tariffs are voluntary and quotas are not.
Purchasing power parity is used to estimate equilibrium:
A. inflation rates. B. exchange rates. C. price levels. D. interest rates.