When the Equilibrium Price Level Adjusts to an Increase in Autonomous

question 103

Multiple Choice

When the equilibrium price level adjusts to an increase in autonomous investment spending, the impact of the multiplier effect resulting from that spending increase

• A) will increase real GDP by an amount smaller than the multiplier effect would indicate.
• B) will increase nominal GDP by an amount smaller than the multiplier effect would indicate.
• C) will have no impact on the real GDP.
• D) is only felt when there are changes in consumption.

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Definitions:

Incremental Sales

The additional sales generated by a new marketing campaign, product launch, or any other business activity, over and above existing sales.

Cash Operating Expenses

Expenses directly related to the daily operational activities of a business, such as salaries, rent, and utilities, that require immediate cash payment.

Net Present Value

A financial metric that calculates the present value of all future cash flows of a project, minus the initial investment, to evaluate its profitability.

Cash Outflow

A financial term indicating the outflow of cash from a business or individual for expenses, investments, and other transactions.