The Equilibrium Level of Real GDP Is $5,000 Billion, the Full

question 59

Multiple Choice

The equilibrium level of real GDP is $5,000 billion, the full employment level of real GDP is $6,000, and the marginal propensity to consume (MPC) is 0.90. Which of the following statements is true ?

• A)A recessionary gap exists equal to $100 billion.
• B)The full employment target could be reached if government increased its spending by $100 billion.
• C)Both of the above statements are true.
• D)Neither of the above statements are true.

---

Definitions:

Support Department Allocation Rate

A rate used to allocate the costs of support departments to producing departments or directly to products based on relevant factors or usage measures.

Cost Drivers

Factors that cause the cost of an activity or product to change, such as production volume or raw material prices.

Support Department Cost

Expenses related to the functions that assist the direct operations or production departments of a business, such as human resources or maintenance.

Return on Investment

A metric for assessing the effectiveness or gains of an investment, determined by dividing the net earnings by the investment's expense.