In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true?
a) when consumption increases by $5, investment increases by a maximum of $1
b) when consumption increases by $5, savings increase by a maximum of $1
c) when investment increases by $1, income increases by a maximum of $5
d) when investment increases by $1, consumption increases by a maximum of $5
e )when income increases by $1, investment increases by a maximum of $5
Ans: c) when investment increases by $1, income increases by a maximum of $5
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