If the marginal propensity to consume is ________, then a $2 trillion increase in disposable income increases consumption expenditure by $1.2 trillion. If the marginal propensity to consume is ________, then a $2 trillion increase in disposable income increases consumption expenditures by $1.6 trillion.
A) 0.6; 0.8
B) 1.67; 2.25
C) 1.2; 1.6
D) 6.0; 8.0
E) None of the above because a $2 trillion increase in disposable income always leads to a $2 trillion increase in consumption expenditure.
A
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Refer to above figure. With free trade and no tariffs, what is the quantity of Widgets consumed domestically?
What will be an ideal response?
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