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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
Note 
Flashcard (27)