Suppose Aggregate Output Is Demand- Determined

question 60

Multiple Choice

Suppose aggregate output is demand- determined. If the business community decreases its planned investment expenditures by $4 billion, causing equilibrium national income to fall by $20 billion, the marginal propensity to spend must be

• A)2/5.
• B)1/3.
• C)1/2.
• D)2/3.
• E)4/5.

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Definitions:

Net Sales

The amount of sales generated by a company after deductions for returns, allowances for damaged or missing goods, and discounts.

Markup

The percentage of the cost price of items that is added on to cover overhead expenses and profit.

FIFO Method

"First In, First Out," an inventory management and valuation method where goods produced or acquired first are sold or used first.

Ending Inventory

The value or quantity of goods available for sale at the end of an accounting period, calculated to determine the cost of goods sold.