Assume the Multiplier Method Is Used and the Multiplier Is

question 107

Multiple Choice

Assume the multiplier method is used and the multiplier is determined to be 3 based on experience.Accounting records show that the measured external failure costs are $500,000.Then the total external failure costs are estimated to be

• A) $166,667.
• B) $55,556.
• C) $1,500,000.
• D) $4,500,000.

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Definitions:

Capitalism

An economic system where private individuals own and control the means of production and distribution of goods, with minimal government interference.

Socialism

An economic and political system where the government or the public as a whole owns and controls the means of production, aiming for an equitable distribution of wealth and resources.

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with prices serving as signals to participants.

Circular Flow Diagram

An illustration showing the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.