When There Are Few Unemployed Resources, Additional Spending Will Tend

question 70

Multiple Choice

When there are few unemployed resources, additional spending will tend to

• A) flow directly to the unemployed resources, so that the multiplier can be maintained at 1/1-mpc.
• B) increase the marginal propensity to consume, and thereby increase the size of the multiplier.
• C) increase the demand for resources and drive prices downward, increasing the size of the multiplier.
• D) bid resources away from other activities and drive prices upward, reducing the size of the multiplier.

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Definitions:

Net Sales

The revenue from sales transactions after deducting returns, allowances for damaged or missing goods, and discounts.

Multiple-Step

A method of preparing an income statement that separates operating revenues and expenses from non-operating ones, showing multiple levels of income calculation.

Single-Step

Single-step is a simplified method of preparing income statements that calculates net income or loss by subtracting total expenses from total revenues in one step.

Inventory

The raw materials, work-in-process products, and finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.