Quiz Mods 16-17

Which of the following accurately describes investment spending?

Actual investment = planned investment + unplanned investment.

Which of the following will increase the aggregate consumption function?

Increase in aggregate wealth

Whenever planned aggregate spending exceeds GDP:

unplanned inventory investment is negative

if the MPS = .1 then the value of the multiplier equals:

10

The multiplier process

is limited with the total change in real GDP dependent upon the size of the MPC.

Suppose that a financial crisis decreases spending by $100 billion and the MPC is .8. Assuming no taxes and no trade, by how much will real GDP change?

$500 billion decrease

Other things being equal, investment spending ________ when _________

decreases; firms expect sales to fall

When planned investment is less than actual investment, then there must be:

past earnings firms retain to finance investments

inventory investment is

a part of the unplanned investment spending and may either be positive or negative

Falling inventories indicate _____ unplanned inventory investment and a _____ economy.

negative, growing