Will marginal propensity to spend (d) will be low if,
propensity to import (m) is low, marginal propensity to consume (b) is low and tax rate is (t) is low?
Take a shot. Do some research, then tell us what you think. hint: think about how each of your factors relates to consumption. e.g., does a desire for imported goods mean a higher or lower desire to spend?
low t and low m, means higher desire to spend..but low b means lower desire to spend...so i guess overall it will be higher..am i correct?
I think low propensity to import means low desire to spend.
While I could argue a low tax rate could go either way on marginal propensity to spend, I think the stronger case is that low tax leads to lower propensity to spend (from disposable income) Low taxes mean more disposable income which means more spending in general. However, at the margin, less of the additional income will be spent. (High income people spend more than low income people, yet high income people have lower marginal propensities to spend.)
So, I would say that marginal propensity to spend will be low if m, b, and t are low.
thanks..that helped a lot.:)
You're welcome! I'm glad I could help clarify things for you. It seems like you have a good understanding of the factors that can affect the marginal propensity to spend (d). Just to summarize:
- A low propensity to import (m) means there is a lower desire to spend on imported goods. This can potentially lower the overall marginal propensity to spend.
- A low marginal propensity to consume (b) means that a smaller portion of each additional dollar earned is spent, which can also lower the overall marginal propensity to spend.
- A low tax rate (t) generally means more disposable income, but at the margin, it can result in a lower marginal propensity to spend. This is because as income increases, a smaller proportion of that additional income is typically spent.
Considering these factors together, it is likely that the marginal propensity to spend will be low if all three factors (m, b, and t) are low. I hope this explanation clears things up further! Let me know if you have any more questions.