What is the relationship between actual investment, planned investment, and saving in an economy? What conditions among these concepts produce equilibrium?
What will be an ideal response?
Actual investment consists of both planned and unplanned changes in inventories. It equals saving by definition. Unplanned changes in inventories, however, are the item that helps equate actual investment with saving. Thus, planned investment and saving will only be equal when there are no unplanned changes in inventories. Equilibrium occurs in the economy only when planned investment equals saving.
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If we consider the reality that each worker has different skills, then the production possibilities frontier would:
A. have a convex shape. B. have a concave shape. C. be a straight line. D. shift outward.
Figure 11-1
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In Figure 11-1, the slope of the expenditures schedule is 0.75, and the government wishes to achieve full employment. It should
A. cut spending by 1,000. B. increase spending by 1,000. C. cut taxes by 1,000. D. increase spending by 250. E. cut taxes by 250.
Which of the following is not an economic investment?
A) construction of a housing project for the homeless B) the increase in the inventory on a grocer's shelf C) the purchase of machinery by ABC Manufacturing Company D)the purchase of 50 shares of Aliant by a retired business executive
The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market.
A. investment B. money C. capital D. savings