Planned investment spending is higher OA. when real interest rate is higher. O B. during financial frictions. OC. when businesses are optimistic. OD. all of the above. OE. A and C.
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- Suppose that interest rates fall. This will cause: the present values of investment projects to fall; this will cause investment to rise a. Ob. the present values of investment projects to fall; this will cause investment to fall Oc the present values of investment projects to rise; this will cause investment to rise the present values of investment projects to rise; this will cause investment to fall Od.A high interest rate will lead to: O a. low investment spending. O b. no investment spending. no changes in investment spending. O d. high investment spending. C.If the real interest rate increases from 2% to 4%, all other things equal, O a.People will be more willing to save. b.Business investment spending for new capital will increase. c.People will be less willing to save. O d.Business investment spending for new capital will remain unchanged.
- The catch-up effect refers to the idea that Select one: a. Rich countries aid relatively poor countries so as to catch them up O b. None of the answers are correct Oc. Saving will always catch-up with investment spending O d. It is easier for a country to grow fast if it starts out relatively poor O e. If investment spending is low, increased saving will help investment to catch-up1. Use a saving-investment diagram to explain what hap- pens to saving, investment, and the real interest rate in each of the following scenarios in a closed economy. ek ja. Current output rises due to a temporary produc- tivity increase. V b. The tax code changes so that business firms face ehigher tax rates on their revenue (offset by other eb on lump-sum tax changes so there's no overall change in tax revenue).Value of marginal propensity to save always greater than one a. True O b. False
- Value of Marginal Propensity to Consume lies between a. None O b. Negative one and Positive one O c. 0.5 and One С. d. Zero and One е. One and twoMost economists believe that classicalmacroeconomic theorya. is valid only in the long run.b. is valid only in the short run.c. is always valid.d. is never valid.1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
- Government spending does not affect the investment schedule. O a. True O b. False; shifts investment schedule to the right O c. False; makes investment schedule steeper or flatter O d. False; shifts investment schedule to the leftThe standard definition of a "recession" is Select one: O O a. two or more consecutive quarters of falling Real GDP. b. the lowest point in a business cycle. c. the declining production phase of a business cycle 4 The three ways of measuring Gross Domestic Product are the approach, thWhat of the following summarises the the paradox thirft? a. if all people reduce their consumption, the additional saving makes higher investment possible. b. if all people try to increase their saving simultaneously then consumption, income and emplyment will fall but the volume of saving will remain unchanged. c. higher saving is required to achieve higher investment. d. the proprotion of national income saved decreases if the marginal propensity to consume decreases.