Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 69

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If government purchases increases by $200 billion, the aggregate expenditures curve will shift up by

• A) $200 billion.
• B) $200 billion *the multiplier.
• C) $200 billion * marginal propensity to consume.
• D) $200 billion *(1 ÷ marginal propensity to consume).

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Definitions:

Absorption Costing

A financial strategy that absorbs all the manufacturing outlays, encompassing direct materials, workforce costs, alongside both adaptable and unchanging manufacturing overheads, into the cost of a product.

Unit Product Cost

The cost allocated to a single unit of product, encompassing direct materials, direct labor, and allocated overhead costs.

Income Statement

A financial report outlining the revenues, expenses, and profits or losses of a company over a specific period.

Fixed Manufacturing Overhead

Costs associated with production that do not change with the level of output, such as rent for factory facilities or salaries of permanent staff.