Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10.By how much does spending on domestic goods increase if income increases by $300?

Question

Quizplus · Accepted Answer

The spending on domestic goods is calculated by multiplying the increase in income by the marginal propensity to consume minus the marginal propensity to import: $300 * (0.75 - 0.10) = $195.

Assume That the Marginal Propensity to Consume Equals 0