If Trent's MPC Is 0

question 13

Multiple Choice

If Trent's MPC is 0.80, this means that he will

• A) spend eight-tenths of any increase in his disposable income.
• B) spend eight-tenths of any level of disposable income.
• C) break even when his disposable income is $8,000.
• D) save two-tenths of any level of disposable income.

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Definitions:

Direct Materials Budget

A financial plan that estimates the raw materials required for production and the cost of these materials for a specific period.

Ending Direct Materials Units

The quantity of direct materials still on hand at the end of a production period.

Cash Budget

A financial plan that projects cash inflows and outflows over a specific period, helping businesses manage their liquidity.

Cash Deficiency

A situation where a business or individual has insufficient cash to cover expenses or liabilities.