The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $800. Given this scenario, which of the following statements is true for the economy?
A) The marginal propensity to save is 0.5.
B) Savings are the only source of leakages.
C) The spending multiplier is 5.
D) The spending multiplier is less than 5.

Question

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The Answer of The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $800. Given this scenario, which of the following statements is true for the economy?
A) The marginal propensity to save is 0.5.
B) Savings are the only source of leakages.
C) The spending multiplier is 5.
D) The spending multiplier is less than 5.

The Marginal Propensity to Consume for an Economy Is 0