Assume There Is No Government or Foreign Sector

question 173

Multiple Choice

Assume there is no government or foreign sector. If the multiplier is 10, a $10 billion increase in planned investment will cause aggregate output to increase by

• A) $1 billion.
• B) $5 billion.
• C) $10 billion.
• D) $100 billion.

---

Definitions:

Average Costs

The total cost of production divided by the quantity produced, often used to evaluate production efficiency.

Fixed Costs

Costs that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance premiums.

Marginal Costs

Marginal costs represent the change in total production cost that arises when the quantity produced is incremented by one unit, essentially the cost of producing one additional unit of a good.

Marginal Productivity

Marginal productivity is the additional output that is produced by using one more unit of a certain input, assuming that all other inputs remain constant.