Both the PIH and the LCH Predict That

question 56

Multiple Choice

Both the PIH and the LCH predict that

• A)total consumption may rise as a fraction of income when actual income rises due to the upsurge in purchases of consumer durables.
• B)the saving ratio will fall with higher income when consumer durables are counted as consumption expenditure.
• C)the saving ratio will fall with higher income when consumer durables are counted as saving.
• D)A and B are both correct.

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Definitions:

Ordering Costs

The expenses directly tied to the creation and processing of an order.

Production Process

The sequence of operations or procedures used to create a product or provide a service, often involving the assembly of raw materials, labor, and machinery.

Accounts Receivable

A financial record of the amounts owed to a business by its customers for goods or services delivered on credit.

Marketable Securities

Refers to liquid financial instruments that can be quickly converted into cash at market value.