In the Aggregate Expenditures Model, If a $50 Billion Increase

question 170

True/False

In the aggregate expenditures model, if a $50 billion increase in investment leads to an increase in equilibrium real GDP of $250 billion at the initial price level, then the multiplier is 4.

Understand the concept of equivalent ratios and how to reduce them to their smallest terms.

Apply principles of proportions to solve for unknown quantities.

Understand and apply the concept of lowest terms in ratios.

Calculate the ratios of real-world quantities, including financial and material allocations.

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Definitions:

Seasonal Peaks

Periods within a year marked by a higher than average demand, sales, or activity in certain industries due to seasonal factors.

Temporary Working Capital

Funds a company temporarily needs to cover its short-term obligations.

Permanent Working Capital

The minimum amount of working capital a company needs to sustain its daily operations continuously.

Aggressive Working Capital Policy

A strategy involving higher levels of current assets relative to liabilities, aiming for growth but increasing liquidity risk.