Quiz3_Questions - AntrikshAgarwal 1 QUIZ# Consumption is...

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Antriksh Agarwal PRINCIPLES OF MACROECONOMICS  QUIZ #3 – COVERING CHAPTERS 8 AND 9   1. Consumption is positively related to household income and wealth and household's expectations about the future, but negatively related to interest rates. Explaination: From a household perspective it’s the money earned while in a firm through revenue 2. 3. Actual investment represents the amount of investment that takes place during a given period. Actual investment, therefore, also takes into account any unplanned changes in inventories. Planned investment represents those additions to the capital stock that are planned by firms. Yes, it is possible for actual investment to exceed planned investment. For this to occur, production must exceed sales. In this case, firms experience an unplanned increase in inventories that causes actual investment to exceed planned investment. 4. (a) Y = 2000 (b) C = 1900 and S = 100 (c) Y = 2400. Y increased by 400 as a result of the 100 unit increase in I. The multiplier is, therefore, 4. (d) C will rise as Y rises. S will also rise as Y rises.

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