If an Increase in Investment Spending of $20 Million Results

question 207

Multiple Choice

If an increase in investment spending of $20 million results in a $200 million increase in equilibrium real GDP, then

• A)the multiplier is 0.1.
• B)the multiplier is 1.
• C)the multiplier is 10.
• D)the multiplier is 100.
• E)the multiplier is 180.

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Definitions:

Days' Sales

A financial metric that calculates the average time it takes for a company to convert its inventory into sales.

Receivables Ratio

The Receivables Ratio, also known as the Accounts Receivable Turnover Ratio, measures how efficiently a company collects cash from its customers by comparing sales to the average receivables.

Outstanding Accounts

Accounts or invoices that have been billed but not yet paid by customers.

EBIT

Earnings Before Interest and Taxes, a financial metric indicating a company's operating profitability by excluding interest and taxes from earnings.