What is the effect of an increase in investment? When investment increases, O A. aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment O B. aggregate demand increases and aggregate supply increases investment O C. aggregate demand increases by an amount equal to the increase O D. aggregate supply increases. The increase in aggregate supply is greater than the increase in investment because capital increases, which increases potential GDP

What is the effect of an increase in investment? When investment increases, O A. aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment O B. aggregate demand increases and aggregate supply increases investment O C. aggregate demand increases by an amount equal to the increase O D. aggregate supply increases. The increase in aggregate supply is greater than the increase in investment because capital increases, which increases potential GDP

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If real GDP is $2200 billion, the GDP deflator is 110, nominal net exports are $100 billion, nominal investment is $200 billion, and nominal government expenditures are $400 billion, what is nominal consumption? 1) $1300 2) $1500 3) $1520 O 4) $1720
Which of the following is true? OA. Potential GDP decreases as the price level increases. OB. The potential GDP line has a negative slope. OC. Aggregate supply is another name for potential GDP. OD. At full employment, aggregate supply is equal to potential GDP. O E. Potential GDP increases as the price level increases.
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b.makes prices "sticky." O c. maximizes its volatility. O d. automatically reduces recessionary trends. QUESTION 5 An increase in taxes shifts the O a. aggregate supply curve outward. O b. consumption schedule downward. O c. aggregate demand curve outward. O d. consumption schedule upward.
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Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve?
How do fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP? Starting from a full-employment equilibrium, a decrease in aggregate demand and creates gap. O A. increases real GDP above potential GDP; an inflationary OB. decreases real GDP below potential GDP; an inflationary OC. increases real GDP above potential; a recessionary O D. decreases real GDP below potential GDP; a recessionary _, short-run aggregate , and the economy returns to a full-employment In the long run, the money wage rate supply equilibrium. O A. rises; increases B. falls; decreases C. rises; decreases D. falls; increases
Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5. The initial change in spending must have been: O $5 billion O $100 billion O $50 billion O $500 billion
A decrease in the price of foreign oil will affect the U.S. economy by O a. decreasing aggregate supply. O b. increasing aggregate demand. O c. increasing aggregate supply. O d. decreasing aggregate demand
QUESTION 6 Potential GDP Aggregate expenditure AE, 45° Y. Real GDP (Y) When real GDP is greater than Yo in the diagram above: O A. - inventories will decrease OB. ·Aggregate expenditure will be less than Real GDP OC. Aggregate expenditure will be equal to Real GDP OD. O D. inventories will increase QUESTION 7 Y G Xn $1,000 $1,400 1,400 1,400 1,400 1,400 $0 $800 -$200 2,500 5,000 7,500 10,000 2,300 3,800 5,300 6,800 1,000 1,000 1,000 1,000 -200 -200 -200 -200 Suppose you are given the data in the table above for a hypothetical economy. All data are in billions of dollars. Yis actual real GDP, and C, Ip, G, and Xn are the consumption, planned investment, government purchases, and net exports components of aggregate expenditures, respectively. Calculate the equilibrium GDP (give your answer in billions of $) Aggregate Expenditure