The Simple Multiplier 1/MPS

question 71

Multiple Choice

The simple multiplier 1/MPS:

• A) Understates the actual multiplier because it includes leakages in domestic spending from the purchase of imports or the paying of taxes
• B) Understates the actual multiplier because it excludes leakages in domestic spending from the purchase of imports or the paying of taxes
• C) Overstates the actual multiplier because it includes leakages in domestic spending from the purchase of imports or the paying of taxes
• D) Overstates the actual multiplier because it excludes leakages in domestic spending from the purchase of imports or the paying of taxes

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Definitions:

Plant Assets

Long-term tangible assets used in the operation of a business, not expected to be converted into cash within a year, such as buildings and machinery.

Year Ended

Refers to the conclusion of a 12-month accounting period, marking the end of a company's financial year.

Natural Resources

Raw materials that are sourced from the environment and utilized for economic gain, such as minerals, forests, and water.

Cost Allocation

The process of identifying, aggregating, and assigning costs to cost objects, such as departments or products.