Consider a Simple Macro Model with Demand- Determined Output

question 70

Multiple Choice

Consider a simple macro model with demand- determined output. In such a model, the smaller the marginal propensity to spend, the

• A)smaller the MPS.
• B)larger is investment.
• C)larger the MPC.
• D)smaller the simple multiplier.
• E)larger the simple multiplier.

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Definitions:

Average Collection Period

The average number of days it takes for a company to collect payments from its customers, a measure of the efficiency of its credit policies.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Quick Ratio

A measure of a company's short-term liquidity, calculated as (Current Assets - Inventory) / Current Liabilities, indicating how well a company can meet its short-term financial liabilities.

Days' Sales in Inventory

A financial metric that estimates how long it takes for a company to turn its inventory into sales.