Question

Assume that the marginal propensity to consume out of disposable income is 0.8 and that the government taxes all income at a constant rate of 30 percent. If gross income increases by $100, consumption will initially increase by $44 A $56 B $70 C $80 D $100__________

Answer 1

Answer:

The answer to this question is $56.

Explanation:

In this question the consumption will initially increase by 56 because when we take 30 percent of the $100 it will give the $30. and when we less the money then the amount will be $70. after multiply the value by 0.8 it will give the 56.0. so the answer of the question is $56.

Example:

100*30/100=30

100-30=70

70*0.8=56.0.