Assume the Current Equilibrium Level of Income Is $200 Billion

question 189

Multiple Choice

Assume the current equilibrium level of income is $200 billion as compared to the full-employment income level of $240 billion.If the MPC is 0.625, what change in aggregate expenditures is needed to achieve full employment?

• A)a decrease of $12 billion
• B)an increase of $25 billion
• C)an increase of $10 billion
• D)an increase of $15 billion

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Definitions:

Average Variable Cost

The total variable cost divided by the quantity of output, representing the variable cost per unit of output produced.

Marginal Cost

The expenditure involved in creating an additional product unit.

Total Variable Cost

The sum of all costs that vary with the level of output, including costs like raw materials and direct labor.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the quantity of output, representing the cost per unit including all expenses.