If Investment Increases by $300 And, in Response, Equilibrium Aggregate

question 358

Multiple Choice

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by
$600, the multiplier is

• A) 0.2.
• B) 0.5.
• C) 5.
• D) 2.

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Definitions:

Unused Capacity

Refers to the available production or service facility space that is not currently being used to generate revenue or produce goods.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not influence future business decisions.

Accumulated Depreciation

The total depreciation expense allocated for a tangible asset over its usage period, reducing its book value.

Replacement Equipment

Items purchased to replace older assets within a business, ensuring operational efficiency and continuity.