Figure 4-6 -In the Figure Above, with IS0 Shifting to IS1 Against

question 53

Multiple Choice

Figure 4-6
-In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, crowding-out is the result that

• A) income stays at YO3.
• B) income rises to Y1 instead of to Y2.
• C) income rises to Y1 instead of staying at YO3.
• D) income rises to Y2 instead of to Y1.

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Definitions:

Variable Cost

Costs that change in direct proportion to changes in the levels of production or sales activities, such as materials and labor costs.

Relevant Range

The range of activity or volume over which the assumed cost behavior is valid, beyond which cost patterns and relationships may change.

Average Costs

The total costs divided by the number of units produced, giving a per unit cost average.

Total Variable Cost

The sum of all costs that vary with output level, including materials, labor, and other costs that increase with production volume.