Suppose the Price Level Is Constant, Output Is Demand- Determined

question 23

Multiple Choice

Suppose the price level is constant, output is demand- determined, and the economy is closed with no government. If the consumption function is C = (2/3) Y, then the simple multiplier is

• A)2/3.
• B)1.
• C)2.
• D)3.
• E)- insufficient information to know.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Outside Purchase

Acquisition of goods or services from external suppliers due to inability or inefficiency in producing internally.

Total Cost Concept

A principle in accounting and economics that considers all costs related to the production of a good or service, both fixed and variable.

Manufacturing Costs

Expenses directly related to the production of goods, including direct labor, direct materials, and manufacturing overhead.