Discuss the relationship between the business cycle and changes in autonomous expenditures
What will be an ideal response?
An increase in autonomous expenditure increases aggregate planned expenditure. At the moment the economy turns the corner into expansion, aggregate planned expenditure exceeds real GDP. Firms' inventories become less than their target levels, so firms increase production in order to build up their inventories. The reverse happens when a recession begins. A decrease in autonomous expenditure decreases aggregate planned expenditure. When the economy turns the corner into recession, aggregate planned expenditure is less than real GDP. As a result firms' inventories exceed their target levels, and so firms decrease production in order to decrease their inventories.
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In the absence of property rights, factories will dump waste into a waterway up to the point where ________ equals ________
A) marginal social cost; marginal social benefit B) marginal social cost; marginal private cost C) marginal private cost; marginal private benefit D) marginal private cost; marginal social cost
A trade surplus occurs when
A) the value of imports is greater than the value of exports. B) government spending is less than total tax revenue. C) consumption is greater than disposable income. D) none of the above.
The Fed's open market operations involve
a. buying and selling of government bonds b. changes of the discount rate c. setting the required reserve ratio d. buying and selling corporate bonds e. a policy of last resort used to avert a financial crisis
A person cutting up her credit cards in an effort to curb her spending is an example of:
A. a commitment device. B. status quo bias. C. loss aversion. D. the endowment effect.