The Widget Tool and Die Company Buys a $400,000 Stamping

question 40

Multiple Choice

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation rate is:

• A) $0.95 per unit.
• B) $0.19 per unit.
• C) $0.05 per unit.
• D) $1.00 per unit.

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Definitions:

Government Purchases

Spending by the government on goods and services that are directly consumed or invested in by the government sector.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels in a short time frame, assuming that some production costs remain fixed.

Spending Multiplier

The ratio of a change in national income to a change in government spending that causes it, indicating the impact of fiscal policy on the economy.

Long Run

A period of time in economics where all factors of production and costs are variable, and all market adjustments have been made.