Explain the difference between planned and actual investment in the economy. Why is the distinction important?
What will be an ideal response?
Actual investment consists of both planned investment and changes in inventories. Unplanned changes in inventories act as a balancing item which equates the actual amounts saved and invested in any period. At above equilibrium levels of GDP, saving is greater than planned investment, and there will be an unplanned increase in inventories. At below equilibrium levels of GDP, planned investment is greater than saving, and there will be an unplanned decrease in inventories. Equilibrium is achieved when planned investment equals saving, and there are no unplanned changes in inventories.
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If the price of labor increases, employers will hire more labor because it is more valuable
a. True b. False
Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because
a. the Federal Reserve is worried about inflation. b. the Federal Reserve is worried about unemployment. c. the Federal Reserve is hoping to reduce the demand for goods and services. d. the Federal Reserve is worried that the economy is growing too quickly.
At which interest rate is the present value of $260.10 two years from today equal to $250 today?
a. 2 percent b. 3 percent c. 4 percent d. 5 percent
Economic surplus
A) does not exist when a competitive market is in equilibrium. B) is equal to the sum of consumer surplus and producer surplus. C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. D) is equal to the difference between consumer surplus and producer surplus.