The Following Information Is for a Closed Economy

question 104

Multiple Choice

The following information is for a closed economy:

-Refer to the above information.The addition of a $100 billion lump-sum tax:

• A) reduces the MPC and increases the multiplier.
• B) increases the MPC and decreases the multiplier.
• C) increases both the MPC and the multiplier.
• D) has no effect on either the MPC or the multiplier.

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Definitions:

Depreciation Expense

Depreciation expense is the systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Salvage Value

The estimated residual value of an asset at the end of its useful life, reflecting what it can be sold for or its scrap value.

Straight-Line Method

A depreciation method where an equal amount of depreciation is charged for each year of the asset's useful life.

Annual Depreciation

The amount of expense allocated during a year to account for the reduction in value of a fixed asset over its useful life.