Explain how an increase in business investment at a constant price level changes equilibrium expenditure
What will be an ideal response?
Investment is a component of autonomous aggregate expenditure. An increase in investment increases aggregate expenditure so the AE curve shifts upward. Equilibrium expenditure increases.
Use the following data to work Problems 6 and 7.
An economy has a fixed price level, no imports, and no income taxes. MPC is 0.80, and real GDP is $150 billion. Businesses increase investment by $5 billion.
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If the exchange rate (dollars per unit of foreign currency) has decreased because of a shift of the supply curve, the demand curve, or both, we say there has been a(n)
a. appreciation of the foreign currency b. depreciation of the foreign currency c. revaluation of the foreign currency d. devaluation of the foreign currency e. fixing of the foreign currency
As a result of an increase in demand from D2 to D1 in Figure 36.4, ceteris paribus, the price of a $40,000 U.S. computer system, in terms of Japanese yen, would: =
A. Decrease in price by 200,000 million yen. B. Increase in price by 800,000 yen. C. Increase in price by 200,000 million yen. D. Decrease in price by 800,000 yen.
A recessionary gap occurs when ________ so that real GDP is ________ potential GDP
A) aggregate demand decreases; less than B) aggregate supply decreases; less than C) potential GDP decreases; greater than D) aggregate demand increases; greater than E) aggregate supply increases; less than
Two goods that are substitutes are:
a. bacon and eggs. b. camera and film. c. tennis racket and tennis balls. d. movie theater tickets and video rentals. e. coffee and cream.