Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 107

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is 0.75. Suppose the equilibrium level of real GDP at the prevailing price is $600 billion below potential real GDP. All else constant, by how much should autonomous aggregate expenditures be increased to reach potential output?

• A) $150 billion
• B) $450 billion
• C) $600 billion
• D) $800 billion

Calculate the margin of safety in dollars and percentage to assess risk in sales projections.

Define and determine fixed, variable, semi-variable, and step costs.

Understand sales mix and its impact on composite unit calculations.

Understand the concept and calculation of the break-even point.

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