In the simple Keynesian model, why does actual investment spending have to equal saving in the absence of the government and foreign sectors? Is this true only for the equilibrium? Explain
What will be an ideal response?
Real Gross Domestic Product (GDP) equals actual investment spending plus consumption spending, and real Gross Domestic Product (GDP) equals consumption spending plus saving. Therefore, actual investment spending and saving are always equal. However, planned investment spending and saving are not always equal. When they are not equal, unplanned changes in inventories make actual investment spending and saving equal. In equilibrium, planned investment and saving are equal.
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Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B?
A) 60 thousand spoons B) 46 thousand forks C) 16 thousand spoons D) 12 thousand forks
If the government legislates policies that block imports of solar panels and gives domestic manufacturers a $5 billion-dollar tax subsidy, the benefits to the U.S. solar panel manufacturing and distribution industry will be very visible. The bearers of the cost of the tax subsidy _____.
a. are easy to identify b. also fit this pattern of identifiable winners c. will have their interests counterbalanced over time d. are more anonymous
If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in the United States?
a. an increase in U.S. imports b. an increase in U.S. exports c. a decrease in U.S. imports d. an increase in U.S. net exports
A rightward shift in the demand curve is called:
a. an increase in income. b. a decrease in demand. c. a decrease in output. d. an increase in demand.