Assume That Taxes Depend on Income

question 333

Multiple Choice

Assume that taxes depend on income. The MPC is 0.5 and t is 0.5. The government spending multiplier is

• A) 1.33.
• B) 2.
• C) 2.5.
• D) 4.

---

Definitions:

Inventories

Quantifiable goods or materials that a business holds for the purpose of sale in the ordinary course of business, production, or use.

Job-Order Costing

A cost accounting system that collects costs individually for each job, suitable for customized orders or distinctly identifiable products.

Overapplied Overhead

A situation where the overhead allocated to products or services is more than the actual overhead incurred.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the goods.