Describe the three different reasons that investment can rise. Explain how one of these three changes could be undesireable in terms of promoting the economic health and strength of the economy
Investment can rise as a result of: (1 ) an increase in business purchases of new capital goods; (2 ) the purchase of new residential housing by individuals; and (3 ) an increase in inventory investment by firms. An increase in inventory investment could result from increases in planned inventory investment or increases in unplanned inventory investment. An increase in unplanned inventory investment would be undesireable in terms of economic health as it is a reflection of the overproduction of output produced by firms compared to buyers' purchases (resulting in an increase in inventories).
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Which of the following is true about the United States?
A. There have been recessions approximately every ten years. B. The pattern of recessions does not occur on a regular basis. C. Periods of economic growth and recessions occur in two-year patterns. D. Recessions always last less than one year. E. Recessions in the United States are generally more severe than they are in other countries.
Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?
a. 0.25. b. 0.50. c. 0.80. d. 1.25
?Exhibit 10A-1 Aggregate demand and supply model
Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-1, the real GDP and price level (CPI) in long-run equilibrium will be:
A. $8 billion and 150. B. $12 billion and 200. C. $8 billion and 250. D. $8 billion and 200.
Refer to the above figure. Suppose the U.S. economy is currently operating at point C. Which of the following actions would you recommend to the president of the United States?
A. Engage in contractionary fiscal policy by raising income taxes. B. Raise government spending to stimulate investment, consumption and net exports. C. Reduce the interest rate to stimulate investment minimizing the crowding out effect. D. Increase government spending while holding taxes constant.