If investment decreases by $20 billion and the MPC = 0.8, the resulting decrease in the consumption component of AD is:
a. $16 billion
b. $4 billion.
c. $100 billion.
d. $80 billion.
d
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Suppose an economy has output of 2100, government spending of 40, consumption of 1600, and absorption of 1940. Calculate the equilibrium values of investment and net exports
What will be an ideal response?
In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy. Many refineries went offline disrupting oil refining and distribution. What do you think was a likely result?
A) the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right B) the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left C) the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve D) all of the above E) none of the above
Suppose one observes that when the price of peanut butter increases, the demand for jelly increases. One should conclude that:
A. peanut butter and jelly are substitutes. B. peanut butter and jelly are complements. C. peanut butter and jelly are normal goods. D. peanut butter and jelly are inferior goods.
Eventually the process of capital deepening comes to a halt as depreciation catches up with total saving.
Answer the following statement true (T) or false (F)