If the Marginal Propensity to Consume Increases

question 115

Multiple Choice

If the marginal propensity to consume increases,

• A)firms will increase production.
• B)spending will remain above output until interest rates increase and equilibrium is restored.
• C)the expenditure line will shift upward in a parallel fashion.
• D)investment will have to fall to restore equilibrium.
• E)too much output is being produced, and firms will cut production until equilibrium is restored.

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Definitions:

Direct Write-Off Method

An accounting method where uncollectible accounts receivable are written off directly against income at the time they are deemed uncollectible.

Uncollectible Accounts

Financial debts deemed unrecoverable from debtors that are often written off as bad debt expense.

Matching Principle

An accounting principle that dictates expenses should be recorded in the same period as the revenues they helped to generate.

Manipulation

Manipulation in financial contexts refers to unethical or illegal actions to misleadingly influence market prices, company performance, or financial reports.