Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 74

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G =Government Purchases. Consider a simple aggregate expenditures model, where
AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

• A) 1.33
• B) 2.5
• C) 5
• D) 15

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Definitions:

Break-even Point

The level of production or sales at which the revenues of a business equal its costs, resulting in neither profit nor loss.

Total Contribution Margin

This refers to the total amount of revenue left over after deducting all variable costs, indicating the total contribution towards covering fixed costs and generating profit.

Break-even Point

The point at which total revenue equals total costs, resulting in no profit or loss for the business.

Sales Mix

The combination of different products or services that a company sells, which impacts the overall profitability.