Consider a Model in Which Output Is Demand-Determined

question 114

Multiple Choice

Consider a model in which output is demand-determined.If the marginal propensity to spend out of national income is 0.4,then a $0.6 billion decrease in government purchases will cause equilibrium national income to ________ by approximately ________.

• A)decrease; $1.50 billion
• B)decrease; $1.00 billion
• C)decrease; $0.24 billion
• D)increase; $1.00 billion
• E)increase; $1.50 billion

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Definitions:

Profit

The financial gain achieved when revenues generated from business activities exceed the expenses, costs, and taxes associated with sustaining the business.

Work in Process

Goods that are in the production process but are not yet completed, reflecting a stage between raw materials and finished goods.

Materials

The raw inputs or components used in the manufacturing process to produce goods or products.

Cost of Goods Sold

The expenses directly related to creating a company's sold goods, covering both material costs and wages.