Suppose an Economy's Consumption Schedule Shifts from C₁ to C

question 27

Multiple Choice

Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below. We can say that its:

• A) MPC has increased but its APC at each income level is unchanged.
• B) APC at each income level is increased but its MPC is unchanged.
• C) MPC and APC at each income level have both increased.
• D) MPC and APC at each income level have both decreased.

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Definitions:

Invoice

A document issued by a seller to a buyer that outlines a transaction and includes details of goods or services provided, prices, date, and payment terms.

Accounts Receivable

Funds that customers owe to a business for products or services provided but not yet compensated for.

Liquidity

A measure of how easily assets can be converted into cash without significant loss in value.

Deposits in Transit

Funds that have been received and recorded by a business but not yet recorded by the bank, leading to a discrepancy in the accounting records until the deposit clears.