Consider a Simple Macro Model with Demand-Determined Output

question 105

Multiple Choice

Consider a simple macro model with demand-determined output.Which of the following parameters will produce the largest fluctuations in real GDP from 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:

Variable Utilities Cost

Expenses for utilities that fluctuate based on consumption levels, such as water, electricity, and gas.

Machine Hour

This term typically refers to the amount of time a machine is operating or available for production in a manufacturing process.

Cost-volume-profit Analysis

A managerial accounting method used to estimate the impact of different levels of cost and volume on operating profit.

Mixed Costs

Expenses that have both fixed and variable components, changing in total with activity level but not directly proportional.