If Investment Decreases by $20 Billion and the Economy's MPC

question 2

Multiple Choice

If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift

• A) leftward by $40 billion at each price level.
• B) rightward by $20 billion at each price level.
• C) rightward by $40 billion at each price level.
• D) leftward by $20 billion at each price level.

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Definitions:

Net Operating Income

The profit a company makes after deducting operating expenses from gross income, excluding interest and taxes.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product cost calculations, excluding fixed overhead.

Break-Even Sales

The amount of revenue from sales at which a business covers its costs, without making a profit or incurring a loss.

Common Fixed Expenses

Overheads that are consistent in amount across different business segments, departments, or products.