In the Keynesian Model, a Decrease in Real Autonomous Spending

question 199

Multiple Choice

In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP) because

• A) consumption decreases as a result of lower real disposable income.
• B) consumption increases while real disposable income decreases.
• C) real autonomous spending decreases further as real disposable income decreases.
• D) government spending also decreases.

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Definitions:

Selling And Administrative Expenses

Expenses related to the selling of products or services and the general administration of a business, not including manufacturing costs.

Planning Budget

A budget designed for planning and strategic purposes, outlining expected revenues, expenses, and other financial activities.

Activity Level

A measure of the volume or quantity of production or operations within a specific period, influencing variable costs.

Activity Variance

The difference between the budgeted amount of activity and the actual amount of activity, often analyzed in budgeting to control costs.