Consider a Simple Macro Model with a Constant Price Level

question 61

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.Desired consumption expenditure at equilibrium national income is

• A)1675.44.
• B)4060.04.
• C)4830.00.
• D)4980.00.
• E)6815.40.

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Definitions:

Differential Cost

The amount of increase or decrease in cost expected from a particular course of action compared with an alternative.

Variable Costs

Costs that vary in proportion to changes in the activity base.

Differential Cost

The difference in total cost that will result from selecting one alternative over another in decision-making situations.

Intermediate Product

A product that requires further processing before it is considered a finished good ready for sale to consumers.