Suppose that there is no government and no international trade. When C + I is less than the level of real GDP
A. unplanned inventories decrease, and real GDP expands.
B. unplanned inventories equal zero, and there is no change in the level of real GDP.
C. unplanned inventories increase, and real GDP contracts.
D. real planned investment spending equals real planned saving.
Answer: C
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When a nation has a high debt/GDP ratio, that nation generally will
a. require high taxes just to pay interest on the debt. b. be able to borrow funds at relatively low real interest rates. c. find that its bonds are attractive to international investors seeking low-risk investments. d. want to increase spending in order to gain the confidence of international investors.
Which of the following changes would not be considered a likely source of changes in Real GDP according to real business cycle theory?
A) a natural disaster B) a technological change C) a change in the price of an important input D) a change in the money supply E) none of the above
An accounting identity
A) ensures that all balances will be in equilibrium. B) is useless in analyzing balance of payments since one cannot tell from the identity whether an equilibrium exists or not. C) ensures a balance but does not ensure an equilibrium. D) applies only to plans of economic agents and not to their actual actions.
Transfer payments are the ________ in the government's budget.
A. largest revenue source B. smallest revenue source C. smallest expenditure source D. largest expenditure source