Suppose There Are Both Multiplier and Crowding Out Effects but Without

question 276

Multiple Choice

Suppose there are both multiplier and crowding out effects but without any accelerator effects. An increase in government expenditures would definitely

• A)shift aggregate demand right by a larger amount than the increase in government expenditures.
• B)shift aggregate demand right by the same amount as an the increase in government expenditures.
• C)shift aggregate demand right by a smaller amount than the increase in government expenditures.
• D)Any of the above outcomes are possible.

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Definitions:

Unit Product Cost

The total cost (variable and fixed) incurred to produce, store, and sell one unit of a product.

Elastic Demand

Describes a market condition in which the demand for a product is sensitive to price changes.

Target Costing

A pricing strategy in which the selling price and profit margin are used to determine the maximum cost that can be incurred on a product, with the aim of ensuring competitiveness and profitability.

Target Profit

The specific net income a business intends to reach within a designated timeframe.