A $1.00 change in the value of stocks changes consumption and investment by about
A) $1.10.
B) $1.00.
C) $.10.
D) $.04.

Question

Quizplus · Accepted Answer

A $1.00 change in the value of stocks typically has a smaller effect on consumption and investment, estimated at about $.04, according to the marginal propensity to consume out of wealth. This reflects the idea that a small portion of wealth changes translates into changes in spending and investment.

A $100 Change in the Value of Stocks Changes Consumption and and Investment