The Expenditure Multiplier Equals

question 302

Multiple Choice

The expenditure multiplier equals

• A) APC - APS where APC is the average propensity to consume and APS is the average propensity to save.
• B) 1/slope of AE curve).
• C) MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume.
• D) 1/1 - slope of AE curve).

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Definitions:

Mixed Cost

Mixed cost includes both fixed and variable components, meaning part of the cost varies with the level of activity while the other part remains constant.

Overhead Costs

Expenses related to the operation of a business that are not directly associated with the production of goods or services, such as rent, utilities, and administrative salaries.

Machine Setups

The process of preparing and adjusting machines for a specific production run.

Fixed Manufacturing Cost

Costs that do not change with the level of production, such as salaries of permanent staff and rent for factory space.