332 if real gdp is greater than planned expenditure

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Chapter 11- Income and Expenditure.pdf

332 .   If real GDP is greater than planned expenditure , unplanned inventory investment is negative .
A ) True
B ) False
333 .   Changes in unplanned inventory investment move the economy towards the incomeñexpenditure equilibrium .
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334 .   Decreases in investment spending are usually offset by increases in consumption through the multiplier process .
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340 .   Explain how Finland 's real GDP per capita in 2016 falling by almost 10 % from its peak in 2008 illustrates the positive and negative effects of the multiplier .
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332. If real GDP is greater than planned expenditure, unplanned inventory investment is negative. A) True B) False 333. Changes in unplanned inventory investment move the economy towards the incomeñexpenditure equilibrium. A) True B) False 334. Decreases in investment spending are usually offset by increases in consumption through the multiplier process. A) True B) False 335. If planned aggregate expenditure rises by $10 billion and the marginal propensity to consume is 0.8, then the incomeñexpenditure equilibrium increases by $50 billion. A) True B) False 336. If planned aggregate expenditure rises by $20 billion and the marginal propensity to consume is 0.9, then the incomeñexpenditure equilibrium increases by $18 billion. A) True B) False 337. The main cause of the recession that ended in late 2001 was a decrease in consumer savings. A) True B) False 338. An increase in consumer spending on durable goods was the main factor that ended the recession in 2001. A) True B) False
Page 67 339. Negative inventory investment caused the growth of GDP to be fairly low when the recovery from the recession began in the fourth quarter of 2001. A) True B) False 340. Explain how Finland's real GDP per capita in 2016 falling by almost 10% from its peak in 2008 illustrates the positive and negative effects of the multiplier. 341. Suppose that the marginal propensity to consume is 0.80 and the government spends $10 million to repair a bridge. Assuming no taxes and no international trade, explain how the $10 million of government spending will increase GDP by $50 million. 342. How does a nation's savings rate, as measured by the marginal propensity to save, affect the size of the spending multiplier? 343. How can autonomous consumption be greater than zero when disposable income equals zero? 344. Suppose you have estimated the consumption function as C = 250 + 0.90 * YD . What is the equation for the corresponding savings function? Use the following to answer question 345: 345. (Table: Consumption for Four Consumers) Use Table: Consumption for Four Consumers. Construct the aggregate consumption function.
Page 68 346. Suppose the economy is in incomeñexpenditure equilibrium. How will each of the following situations affect planned investment and unplanned inventory investment? a. The Bank of Canada decreases interest rates. b. Major economic indicators decrease business optimism about growth in real GDP. 347. In a simple, closed economy (no government and no foreign sector), autonomous consumer spending is $100 and planned investment spending is $300. The marginal propensity to consume is 0.75. a. Solve for the equilibrium level of real GDP. b. If real GDP is $2 000, what is unplanned inventory investment? 348. In a simple, closed economy (no government and no foreign sector), autonomous consumer spending is $250 and planned investment spending is $500. The marginal propensity to consume is 0.80.

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