Suppose Inflation Is a Threat Because the Current Aggregate Demand

question 61

Multiple Choice

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

• A) decreasing tax revenues by $600 billion.
• B) decreasing government spending by $200 billion.
• C) increasing tax revenues by $200 billion.
• D) increasing government purchases by $150 billion.

Recognize the impact of location decisions on operational effectiveness.

Understand the application of SWOT analysis in strategic operations management.

Grasp the concept of operations strategy alignment with organizational strategy.

Acknowledge the differences in strategic decisions between manufacturing and service organizations.

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Definitions:

Returns to Scale

The change in output resulting from proportional change in all inputs (factors of production); can be increasing, constant, or decreasing.

Returns to Scale

The change in output resulting from a proportional change in all inputs (factors of production); it identifies whether increasing inputs leads to proportionate, more than proportionate, or less than proportionate changes in output.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one more unit of a good varies as the quantity of production increases.

Average Cost Curve

A graphical representation that shows how the cost per unit of producing a good changes with changes in the volume of output.