If Government Expenditures Increase by $20 Billion and Equilibrium GDP

question 135

Multiple Choice

If government expenditures increase by $20 billion and equilibrium GDP increases by $50 billion as a result, we can conclude that:

• A)the expenditures multiplier is 2.
• B)the MPC for this economy is .6.
• C)inflation is occurring.
• D)the MPS for this economy is .6.

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Definitions:

Carrying Cost

The total cost of holding inventory, including storage, maintenance, and insurance.

Managing Credit

The process of monitoring and controlling a person's or business's credit usage and payments to ensure financial stability and minimize risk of default.

Required Return

The minimum return an investor expects to achieve by investing in a particular asset, considering its risk level.

Cost of Equity

This refers to the return a company is expected to offer investors to compensate for the risk they take by holding its stock.