In the Aggregate Expenditures Model, If Aggregate Expenditures Equal $800

question 138

Multiple Choice

In the aggregate expenditures model, if aggregate expenditures equal $800 billion and real GDP equals $600 billion,

• A) unplanned inventory accumulation equals $200 billion.
• B) unplanned inventory depletion equals $200 billion.
• C) consumption plus investment equals $200 billion.
• D) net investment equals $200 billion.

---

Definitions:

Fixed Expenses

are costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Variable Expenses

Costs that change in proportion to the level of production or sales activity.

Contribution Margin Ratio

A financial measure that gauges the proportion of sales revenue that exceeds variable costs, indicating how much revenue contributes towards covering fixed expenses and generating profit.