Given the MPS = 0

question 47

Multiple Choice

Given the MPS = 0.40,with no government and no foreign trade,a $10 billion increase in investment will eventually result in an increase in

• A)Consumption by $40 billion.
• B)Total spending by $15 billion.
• C)Consumption by $15 billion.
• D)Total spending by $2.5 billion.

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Definitions:

Undercapitalized

A condition where a company does not have sufficient capital to conduct normal business operations effectively.

Accounts Payable

The amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.

Cost of Trade Credit

The effective interest rate associated with taking discounts offered by suppliers for early payment or the cost of forgoing those discounts.