What Does the Payback Period Determine

question 9

Multiple Choice

What does the payback period determine?

• A) How long it will take to pay off debts
• B) How long it will take break even on fixed and variable costs
• C) How long it will take to recover the expense of the equipment
• D) How long it will take to start generating a profit

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Definitions:

Consumption Function

An economic formula that expresses the relationship between total consumption and gross national income, indicating how much households are likely to spend.

Disposable Income

Disposable income refers to the amount of money individuals or households have available to spend or save after income taxes are deducted.

Marginal Propensity

The ratio of change in an economic variable (e.g., consumption, saving) to a change in another economic variable (e.g., income).

Disposable Income

Post-tax income that households can allocate towards savings and expenses.