sample answers second exam for distribution f 08(2)

sample answers second exam for distribution f 08(2) -...

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Sample Answers Exam Two Economics 100 The following are outlines of good answers. There are a variety of ways to approach each question. 16. Spending falls and therefore spending is less than output. Inventories rise as businesses cannot sell all they are producing. Businesses contract production. As output falls, incomes of all kinds decrease. As individual incomes decrease, saving, tax payments, and consumption spending decrease. Spending again falls below output. Businesses contract output to meet the new lower spending, income decreases again, followed once more by a decrease in consumption spending by a portion of that decrease in spending. Spending still is less than output. Output continues to contract followed by smaller decreases in spending. The process continues until spending just equals output. Because subsequent decreases in spending are smaller each time around, the process ends with spending equal to output.
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This note was uploaded on 12/19/2009 for the course ECON ECON 100 taught by Professor Stephenbuckles during the Spring '09 term at Vanderbilt.

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sample answers second exam for distribution f 08(2) -...

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