Answer the following statements true (T) or false (F)
1) If the MPC is .8 in a private closed economy, a $30 billion increase in planned investment will
increase equilibrium real GDP by $120 billion.
2) Actual investment consists of planned investment plus unplanned changes in inventories (plus
or minus).
3) A $20 billion decrease in investment in a private closed economy that has an MPS of .5 will
reduce saving by $10 billion once the multiplier process has ended.
4) Exports are added to, and imports are subtracted from, aggregate expenditures in moving
from a closed to an open economy.
1) F
2) T
3) F
4) T
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Indicate whether the statement is true or false
According to the adaptive rationality standard, people might choose to have unselfish preferences because:
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