When Households Decrease Consumption Spending, Which of the Following Is

question 17

Multiple Choice

When households decrease consumption spending, which of the following is likely to occur?

• A) The overall level of economic activity in the circular flow of income will remain unchanged.
• B) Firms will increase the level of investment in capital equipment and assets.
• C) Firms will employ more factors of production in an attempt to stimulate household spending.
• D) Firms will decrease their demand for the factors of production from households.

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Definitions:

Overhead Applied

The portion of overhead costs allocated to individual products or services based on a predetermined rate.

Machine-Hours

An evaluation of manufacturing productivity or action determined by how long equipment is running.

Total Job Cost

The total expense attributed to producing a specific job, including materials, labor, and overhead costs.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to individual units of production based on a chosen activity base.