New Classical Macroeconomists Believe That the Predominant Factor Causing Fluctuations

question 1

Multiple Choice

New classical macroeconomists believe that the predominant factor causing fluctuations in aggregate demand is

• A) increases in taxes.
• B) instability in the investment function.
• C) the weak self-regulating mechanisms of a free enterprise economy.
• D) the unstable marginal propensity to consume.
• E) erratic and unpredictable government policy.

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Definitions:

Unit Contribution Margin

Unit contribution margin refers to the difference between the selling price per unit and the variable cost per unit, highlighting the profitability of individual items.

Net Income

A company's overall earnings following the deduction of all expenses and taxes from its gross revenue.

Variable Expense Per Unit

The cost that varies with each unit of product produced or sold.

Total Contribution Margin

The total amount of revenue remaining after all variable costs have been subtracted, indicating how much revenue is available to cover fixed costs and generate profit.