Assume That the MPC Is 0

question 128

Multiple Choice

Assume that the MPC is 0.75. Assuming only the multiplier effect matters, how will an increase in government purchases of $400 billion shift the aggregate demand curve?

• A)It will shift the aggregate demand curve left by $150 billion.
• B)It will shift the aggregate demand curve left by $250 billion.
• C)It will shift the aggregate demand curve right by $750 billion.
• D)It will shift the aggregate demand curve right by $1600 billion.

Calculate and analyze variances between planning and actual budgets.

Interpret the financial impact of changes in production levels or service activity on direct materials, labor, and overhead costs.

Evaluate the effect of activity level changes on net operating income.

Understand the role of fixed and variable costs in budget planning and control.

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Definitions:

Short Run

A period in which at least one of a firm's inputs is fixed and cannot be varied.

Variable Costs

Expenses that directly fluctuate in accordance with the amount of production or output.

Average Cost

The total cost of production divided by the number of units produced, indicating the cost per unit.

Fixed Costs

Costs that do not vary with the level of production or business activity, such as rent, salaries, and insurance.