Suppose Lower Expectations Lead to a Decrease of $240 in Desired

question 87

Multiple Choice

Suppose lower expectations lead to a decrease of $240 in desired investment in the economy and the marginal propensity to consume is 0.75. Table 10.2
$\begin{array}{c}\begin{array}{|l|}\hline\\ \text {Spending Cycles}\\\hline \text {First-cycle}\\\text {spending}\\\hline \text {Second-cycle}\\\text {spending}\\\hline \text {Third-cycle}\\\text {spending}\\\hline \end{array}\begin{array}{c|}\hline \text {Change in this Cycle's Spending}\\\text { and Income}\\\hline\\\quad\quad\quad\quad\quad\quad\quad\quad -\$ 240 \\\hline\\\\\hline\\\\\hline\end{array}\begin{array}{c|}\hline \text {Cumulative Decrease in }\\ \text {Spending and Income}\\\hline\\\quad\quad\quad\quad\quad\quad\quad\quad -\$240\\\hline\\\\\hline\\\\\hline\end{array}\end{array}$

In Table 10.2,what is the cumulative decrease in expenditure by the end of the second cycle?

• A)-$960.00.
• B)-$180.00.
• C)-$480.00.
• D)-$420.00.

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Definitions:

Sales

The transactions involving the exchange of goods or services for money, forming the revenue of a company.

Units

Units refer to the individual components or elements that can be counted or measured, often used in the context of production, sales, and inventory.

Margin Of Safety

The difference between actual sales and break-even sales, indicating how much sales can fall before a business incurs a loss.

Break-Even Sales

The amount of revenue required to cover both the fixed and variable costs of production.