The Multiplier Will Be Smaller, Other Things Being Equal

question 40

Multiple Choice

The multiplier will be smaller, other things being equal:

• A)​the smaller the fraction of each dollar earned that goes to taxes.
• B)​the larger the MPC.
• C)​the smaller the fraction of each dollar of disposable income that goes to saving.
• D)​None of the above are true.

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Definitions:

Maintenance Cost

Expenses incurred to keep property, equipment, or assets in effective operating condition.

Machine Hour

A measure of production time, representing the time a machine is operated to perform work.

High-low Method

A technique used in managerial accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.

Variable Cost

Costs that change in proportion to the activity or business volume, such as materials and labor directly involved in production.