An Aide to a U

question 109

Multiple Choice

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

• A)The actual MPC was larger than the MPC the aide used to compute the multiplier.
• B)The aide thought the tax cut would be permanent,but the actual tax cut was temporary.
• C)The increase in income shifted money demand less than the aide had anticipated.
• D)The increase in income resulted in investment rising more than the aide had anticipated.

Analyze the maximum debt ratio a firm can use based on financial constraints.

Determine net income requirements to achieve a specific return on equity.

Calculate and interpret the total assets turnover ratio.

Understand the concept and calculation of return on equity (ROE).

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Definitions:

Underemployed

Refers to individuals working in a job that does not fully utilize their skills, education, or availability, often resulting in part-time employment despite a desire for full-time work.

Manhattan Island

An island located at the mouth of the Hudson River in New York City, known for being the city's economic and cultural center.

Automobile Factory

A manufacturing facility that specializes in producing automobiles, utilizing assembly lines for efficient mass production.

Unemployment

Occurs when people who are willing to work are unable to find jobs, representing a wasted potential in the economy.