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.

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Definitions:

Pre-acquisition Entry

Accounting entries recorded to prepare the accounts for the consolidation process, reflecting adjustments necessary prior to acquisition.

Subsidiary

A company that is controlled by another company, called the parent company, through the ownership of more than half of its voting stock.

Control Premium

An additional amount paid over the fair market value of a company to acquire a controlling interest in it.

Full Goodwill Method

An accounting approach where goodwill is calculated as the difference between the purchase price and the fair value of the identifiable net assets of the acquired entity, including the non-controlling interest's share of the net assets.