In the Keynesian-Cross Model, Actual Expenditures Differ from Planned Expenditures

question 108

Multiple Choice

In the Keynesian-cross model, actual expenditures differ from planned expenditures by the amount of:

• A) liquidity preference.
• B) the government-purchases multiplier.
• C) unplanned inventory investment.
• D) real money balances.

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Definitions:

Unfavorable Variance

A situation where actual costs exceed the standard or budgeted costs, often indicating inefficiencies or increased expenses.

Favorable Variance

A financial term indicating that actual costs were lower or revenues were higher than planned.

Budgeted Amount

The projected costs or revenues allocated to a specific activity or period, based on estimates.

Budget Ratcheting

The practice of setting future budget allocations based on the current period’s expenditures, discouraging under-spending in fear of budget cuts.