In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true? A. When consumption increases by RM5, investment increases by a maximum of RM1. B. When consumption increases by RM5, savings increase by a maximum of RM1. C. When investment increases by RM1, income increases by a maximum of RM5. D. When investment increases by RM1, consumption increases by a maximum of RM5.
In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true? A. When consumption increases by RM5, investment increases by a maximum of RM1. B. When consumption increases by RM5, savings increase by a maximum of RM1. C. When investment increases by RM1, income increases by a maximum of RM5. D. When investment increases by RM1, consumption increases by a maximum of RM5.
Chapter8: Aggregate Demand And The Powerful Consumer
Section: Chapter Questions
Problem 3DQ
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In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true?
A. When consumption increases by RM5, investment increases by a maximum of RM1.
B. When consumption increases by RM5, savings increase by a maximum of RM1.
C. When investment increases by RM1, income increases by a maximum of RM5.
D. When investment increases by RM1, consumption increases by a maximum of RM5.
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