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Let Y = Real GDP and Yd = Disposable Income

Question 55

Multiple Choice

Let Y = real GDP and Yd = disposable income.Suppose initially, Y = Yd and the marginal propensity to consume (MPC)
Is 0.9.All components of aggregate expenditures except consumption are autonomous.Now suppose the government imposes an income tax rate of 20% on real GDP.What is the marginal propensity to consume following the imposition of an income tax?


A) 0.7
B) 0.72
C) 0.18
D) 1.1

Correct Answer:

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