When Autonomous Expenditure Increases, Equilibrium Aggregate Expenditure

question 159

Multiple Choice

When autonomous expenditure increases, equilibrium aggregate expenditure

• A) decreases by an equal amount to offset the unplanned portion.
• B) increases by an equal amount.
• C) decreases by a greater amount due to the multiplier.
• D) increases by a greater amount due to the multiplier.

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Definitions:

WACC

stands for Weighted Average Cost of Capital, which is a calculation of a firm's capital cost from all sources, including equity and debt, weighted accordingly.

Capital Asset Pricing Model

A model used to determine the theoretical rate of return of an asset, considering risk and the time value of money.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertook by investing their capital.

WACC

Weighted Average Cost of Capital, a calculation that reflects the cost of a company to finance its assets through a mix of equity and debt.