Assume in a Closed Economy That Taxes Are Fixed and the Marginal

question 124

Multiple Choice

Assume in a closed economy that taxes are fixed and the marginal propensity to consume is equal to 0.8. What is the government purchases multiplier?

• A)10
• B)5
• C)4
• D)3

---

Definitions:

Machine-Hours

A measure of production time, representing the total hours that machines are in operation during a specific period.

Spending Variance

The difference between the actual amount spent on a particular item and the amount that was budgeted for it.

Indirect Materials Cost

This refers to the cost of materials that are necessary for the production process but do not become an integral part of the finished product.

Variable Cost

Costs that fluctuate in direct proportion to changes in the level of activity or production volume, such as raw materials and packaging.