The Inequality of Saving and Planned Investment

question 62

Multiple Choice

The inequality of saving and planned investment:

• A)is attributable to a low level of consumption.
• B)may be of considerable significance because of the subsequent changes in income, employment, and the price level.
• C)is of no consequence because a compensating inequality of tax collections and government spending will always occur.
• D)is of no consequence because saving and actual investment will always be equal.

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Definitions:

Unit Variable Cost

The cost that varies with each unit produced, including materials, labor, and other expenses directly tied to production volume.

Minimum Required Rate Of Return

This is the lowest acceptable return on an investment, determined by the investor's risk tolerance, inflation expectations, and the opportunity cost of capital.

Total Fixed Costs

The sum of all costs that do not change with the level of production or sales over a certain period, such as rent, salaries, and insurance.

Average Operating Assets

The average value of the assets used in the normal operations of a business, calculated over a specific period.