Consider a Simple Macro Model with a Constant Price Level

question 21

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend in such a model is 0.6,the simple multiplier is

• A)0.
• B)0.6.
• C)1.67.
• D)2.5.
• E)6.0.

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Definitions:

Fixed Costs

Expenses that do not change in the short term regardless of the level of production or output.

Capital Expenditure

Capital expenditure involves funds spent by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings.

Wages

Payments made to employees based on the amount of time worked or the level of output produced.

Output

The total amount of goods or services produced by a company, industry, or economy.