Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 63

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G =Government Purchases. Consider a simple aggregate expenditures model, where
AE = C + I_P + G, and all components of aggregate expenditures except consumption are autonomous. In this model, the multiplier is found using the formula

• A) ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures.
• B) ∆AE ÷ ∆Y*.
• C) ∆Y* * MPC where MPC = marginal propensity to consume.
• D) 1 ÷ MPC.

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Definitions:

Acquisition

The process by which a company purchases most or all of another company's shares to gain control of that company.

Shares

Units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Business Combination

A transaction or event in which an acquirer obtains control of one or more businesses.

Fair Market Value

An estimate of the price at which an asset or property would change hands between a willing buyer and seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.