In a Simple Economy in Which Prices Are Constant and with No

question 428

Multiple Choice

In a simple economy in which prices are constant and with no income taxes or imports, the slope of the AE curve is 0.8. In order to increase real GDP by $500 billion, then

• A) saving needs to be reduced by $500 billion will lead to the increase of $500 billion.
• B) an increase in investment of $200 billion will lead to the increase of $500 billion.
• C) consumption expenditure needs to increase by $500 billion.
• D) an increase in autonomous expenditure of $100 billion will lead to the increase of $500 billion.

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Definitions:

Allocating

The process of distributing resources or expenses among departments, projects, or activities based on set criteria or methods.

Direct Materials Inventory

Raw materials that can be directly attributed to the production of finished goods, physically incorporated into the product.

Direct Labor

The labor costs directly attributed to the production of goods or services, such as wages paid to workers specifically engaged in manufacturing processes.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor expenses.