The major cause of the recession in 2001 was a decline in _____________ spending.
Fill in the blank(s) with the appropriate word(s).
investment
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Which of the following is true at the equilibrium level of income?
a. Unplanned inventory changes are positive. b. Firms are unable to produce the desired rate of output. c. Autonomous consumption spending is equal to induced consumption spending. d. Aggregate expenditures equal real GDP. e. Unplanned investment spending is positive.
If the MRP of labor is below the wage rate, the firm should lay off workers
a. True b. False Indicate whether the statement is true or false
A businessman is confronted with the following opportunity. He can invest $10,000 in a project that will either succeed wildly, fail miserably, or simply pay him back his $10,000. If wildly successful, the project will earn the businessman $110,000, but if it fails he will not get any money back.
i. If the businessman is risk neutral and he feels that there is a 1/2 chance of miserable failure, then what is the minimum probability of wild success required for him to want to invest in the project? ii. Based on the probability that you derived in part i, explain what you know about the minimum probability that would be required by a risk averse businessman.
All of the following are true when there is an unplanned decrease in inventories, except:
A. GDP is less than aggregate expenditures B. Saving is less than planned investment C. Actual investment is greater than planned investment D. Real GDP will be rising