Consider a simple macro model with a constant price level and demand-determined output.The marginal propensity to spend out of national income,z,can be expressed as ________ (where t = net tax rate and m = marginal propensity to import).
A)z = MPC(1 - t - m)
B)z = tY - mY
C)z = MPC - (1 - t- m)Y
D)z = MPC - (1 - t - m)
E)z = MPC(1 - t)- m

Question

Quizplus · Accepted Answer

The marginal propensity to spend out of national income, z, can be expressed as z = MPC(1 - t) - m. This formula takes into account the marginal propensity to consume (MPC) adjusted for the net tax rate (t), and subtracts the marginal propensity to import (m), reflecting how much of each additional unit of income is spent domestically after taxes and imports are considered.

Consider a Simple Macro Model with a Constant Price Level