How Is the Multiplier Calculated in an Open Economy with Government

question 25

Multiple Choice

How is the multiplier calculated in an open economy with government sector?

• A) 1/(marginal propensity to consume + marginal propensity to save + marginal propensity to export)
• B) 1/(marginal propensity to consume)
• C) 1/(marginal propensity to tax + marginal propensity to export)
• D) 1/(marginal propensity to consume + marginal propensity to tax + marginal propensity to

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Definitions:

Costs

Expenses incurred by a business or individual in the production, maintenance, or purchase of goods and services.

Cost Of Goods Sold

The cost of merchandise sold recognized as an expense; the cost of finished goods available for sale minus the ending finished goods inventory.

Inventory

Inventory consists of the goods and materials a business holds for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.

Conversion Costs

The sum of direct labor costs and manufacturing overhead costs, representing the costs to convert raw materials into finished goods.