Use the Following to Answer Questions

question 197

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Expenditures and Real GDP 2
-(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy where AE = C + I_P, I_P is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of consumption when real GDP is $6,000 billion?

• A) $1,000 billion
• B) $2,500 billion
• C) $4,500 billion
• D) $5,500 billion

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Definitions:

Budgeted Units

The quantity of products or services that are planned to be sold or produced over a specific period, as per the budget.

Plantwide Factory Overhead Rate

A single overhead absorption rate used throughout a manufacturing plant, applied to all cost units irrespective of the department where they were produced.

Overhead Costs

Expenses related to the day-to-day running of a business that cannot be directly linked to any specific business activity or product.

Departments

Divisions within an organization, each focusing on a specific area of function, such as sales or human resources.