According to the Accelerator Model of Inventory Investment,if Firms Desire

question 94

Multiple Choice

According to the accelerator model of inventory investment,if firms desire to hold 25 percent of output as inventories,and output increases by $1 trillion,then inventory investment will increase by:

• A) $0.25 trillion.
• B) $1 trillion.
• C) $1.25 trillion.
• D) $4 trillion.

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Definitions:

Marginal Cost

Marginal Cost is the cost incurred by producing one additional unit of a product or service.

Labor Costs

Expenses associated with employing labor, including wages, salaries, benefits, and taxes.

Average Total Cost

The total cost of production divided by the total output or quantity produced.

Average Variable Cost

Calculated by dividing the total variable costs by the quantity of output produced; it shows the variable cost per unit of output.