Consider a Simple Macro Model with Demand-Determined Output

question 126

Multiple Choice

Consider a simple macro model with demand-determined output.Which of the following parameters will produce the most stable real GDP in the face of autonomous expenditure shocks?

• A)MPC = 0.8,t = 0.2,m = 0.3
• B)MPC = 0.7,t = 0.3,m = 0.2
• C)MPC = 0.7,t = 0.1,m = 0.4
• D)MPC = 0.9,t = 0.2,m = 0.4
• E)MPC = 0.8,t = 0.1,m = 0.2

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Definitions:

Return on Debt

A measure of a company's profitability based on its total debt, indicating how effectively a company uses its borrowing.

Bankruptcy Costs

The expenses associated with the legal process of declaring an entity unable to pay its debts, including court fees, lawyer fees, and administrative costs.

Financial Distress

A situation where a company cannot meet, or has difficulty paying off, its financial obligations to its creditors.

Indirect Costs

Expenses not directly tied to a specific product or service, such as administrative and overhead costs.