The Level of Aggregate Expenditures in the Private Closed Economy

question 41

Multiple Choice

The level of aggregate expenditures in the private closed economy is determined by the

• A) expenditures of consumers and businesses.
• B) intersection of the saving schedule and the 45-degree line.
• C) equality of the MPC and MPS.
• D) intersection of the saving and consumption schedules.

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Definitions:

External Benefits

Benefits derived from a product or service that affect parties who did not choose to incur that benefit.

Efficient Level

The optimal point of operation where resources are used in such a way that maximizes productivity and minimizes waste.

Negative Externality

A cost that is suffered by a third party due to an economic transaction, where the cost is not reflected in the transaction's final price.

Marginal Social Cost

The total cost society bears for the production of an additional unit of a good, including both direct costs to the producer and external costs to others.