Suppose Aggregate Output Is Demand- Determined

question 85

Multiple Choice

Suppose aggregate output is demand- determined. If the simple multiplier is 4 and there is a $10 billion increase in planned investment spending, then equilibrium income will and the marginal propensity to spend must equal .

• A)increase by $40 billion; 0.75
• B)decrease by $10 billion; 0.25
• C)increase by $10 billion; 4.0
• D)increase by $40 billion; 0.25
• E)decrease by $40 billion; 0.75

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Definitions:

Fixed Cost

Fixed cost refers to expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Sunk Cost

Expenditures that have already been incurred and cannot be recovered, which should not affect future decision-making.

Opportunity Cost

Represents the benefit that is missed or given up when an investor, individual, or business chooses one alternative over another.

Ticket Price

The cost associated with purchasing a ticket to gain entry to an event, performance, or mode of transportation.