If the Marginal Propensity to Save (MPS) Is 0

question 103

Multiple Choice

If the marginal propensity to save (MPS) is 0.50, the value of the spending multiplier is:

• A) 1.
• B) 2.
• C) 4.
• D) 9.

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Definitions:

Overapplied Overhead

A situation where the allocated manufacturing overhead cost is more than the actual overhead costs incurred.

Total Manufacturing Costs

The aggregate of all costs involved in the production of a product, including direct materials, direct labor, and overhead.

Predetermined Overhead Rate

A rate calculated before a period begins, based on estimated overhead costs and activity levels, used to allocate overhead costs to products.

Direct Labor

The labor costs directly tied to the production of goods or services, involving tasks that specifically contribute to creating the final product.