What does an increase in the marginal propensity to consume generate ?
Show answer Hide answer
Answer: B. Increase the marginal propensity to save
Explanation
An increase in the marginal propensity to consume implies a decrease in the marginal propensity to save.
Related questions
Q1. What happens when a growing budget deficit forces the government to borrow more ?
Show answer Hide answer
Answer: D. Shift the supply of loanable funds to the left
Growing budget deficits mean the government must borrow more funds from financial markets. Increased government borrowing reduces the total pool of national saving available for other borrowers. A reduction in national s...
Q2. What is the consequence of increased demand for a company's products ?
Show answer Hide answer
Answer: C. increases the prosperity of both the firm and the factors hired by the firm.
Increased product demand raises firm revenues and boosts market profitability. Higher product demand increases the derived demand for labor and other factors. Greater factor demand raises employment and compensation, inc...
Q3. What is the effect of a higher marginal propensity to consume (MPC) ?
Show answer Hide answer
Answer: A. raises the value of the multiplier
A higher marginal propensity to consume means households spend a larger share of extra income. Increased consumer spending generates larger successive rounds of income for other economic agents. Larger subsequent spendin...
Q4. What would be the effect of a price rise in a complementary good for product A ?
Show answer Hide answer
Answer: B. Shift demand for product A inwards
A price rise in a complementary good reduces its consumption in the market. Lower consumption of a complement decreases demand for the primary product A. Complementary goods move inversely in demand when prices change. C...
Q5. What may result from an increase in economic injections ?
Show answer Hide answer
Answer: A. An outward shift of aggregate demand- and demand-pull inflation
Economic injections such as government spending and investment add spending power to the economy. Increased spending shifts the aggregate demand curve outward to the right over time. When aggregate demand outpaces produc...
Q6. What kind of signal is communicated by a rise in the price of beef ?
Show answer Hide answer
Answer: C. tells producers to produce more beef.
A price rise in beef acts as a market signal indicating higher profitability. Higher prices tell producers to increase beef production to capture profits. Market systems use price signals to coordinate decentralized prod...