Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If autonomous saving decreases by 300, which of the following is true?

Question

Quizplus · Accepted Answer

A decrease in autonomous saving will lead to a decrease in total saving, which will increase disposable income. An increase in disposable income will lead to an increase in consumption spending. The increase in consumption spending will lead to an increase in national income. The increase in national income will lead to an increase in tax revenue. The increase in tax revenue will lead to an increase in the budget surplus.

Assume an Economy with No Foreign Sector, a Marginal Propensity