Which of the Following Statements with Respect to the Impact

question 17

Multiple Choice

Which of the following statements with respect to the impact of inventory errors is not correct?
All else being equal,

• A)An overstatement of ending inventory will result in an understatement of income.
• B)An overstatement of ending inventory will result in an overstatement of income.
• C)An overstatement of beginning inventory will result in an understatement of income.
• D)An understatement of beginning inventory will cause cost of goods sold to be understated

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Definitions:

Marginal Propensity

The fraction of an additional amount of income that is spent on consumption. This is a key factor in determining the impact of an income change on the economy.

Aggregate Expenditures

The total amount of spending on goods and services in an economy at a given overall price level and in a given time period.

Spending Multiplier

the ratio of the change in total national income to the initial change in spending that brought it about, illustrating how initial spending leads to increased total spending in an economy.

Aggregate Spending

Aggregate spending is the total amount of spending in an economy, including consumption, investment, government expenditures, and net exports during a specific period.