If a $100 Billion Decrease in Investment Spending Causes Income

question 208

Multiple Choice

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round, income will eventually decline by

• A)$200 billion.
• B)$300 billion.
• C)$400 billion.
• D)$500 billion.

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Definitions:

Controllable Fixed Costs

Fixed costs that management has the ability to influence or change over the short term, such as advertising expenses.

Return on Investment

The ratio of net profit to cost of investment, indicating the efficiency of an investment in generating profit.

Responsibility Level

The scope of authority and accountability designated to individuals or departments within an organization, often related to budgeting and costs.

Controllable Costs

Costs that can be influenced or changed by management decisions in the short term.