If an Economy's MPC Is 0

question 300

Multiple Choice

If an economy's MPC is 0.95 and the MPM is 0.15, then an increase in government spending of $1,000 will increase income by

• A) $1,000.
• B) $4,500.
• C) $5,000.
• D) $8,000.

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Definitions:

Manufacturing Overhead Cost

Indirect factory-related costs incurred when a product is manufactured, including the costs of utilities, maintenance, and property taxes.

Machine Hours

A measure of production output or activity based on the number of hours a machine operates.

Overhead Application Rate

A calculation used to allocate indirect costs to specific production activities or departments based on a predetermined formula.

Machine Hours

A measure of the amount of time a machine is used during a specified period, often used as a basis for allocating machine-related costs to products.