1) If Inventory investment is higher than firms planned,
a) actual investment is greater than planned investment.
b) actual investment is less than planned investment.
c) actual investment must be negative.
d) actual and planned investment are equal.
Refer to the information provided in Figure 8.8
below to answer the questions that follow.
Figure 8.8
2) Refer to Figure 8.8. The amount of planned investment decreases
if the interest rate
a) rises from 4% to 8%.
b) remains at 8%.
c) drops from 8% to 4%.
d) remains at 4%.
3) If unplanned inventory investment is positive, then
a) planned aggregate spending must be less than aggregate output.
b) planned aggregate spending must be greater than aggregate output.
c) planned aggregate spending must equal aggregate output.
d) planned investment must be zero.
4) The larger the MPC, the smaller the multiplier.
a) True
b) False
Homework Answers
(1) Actual investment = Planned investment + Unplanned inventory.investment.
If inventory investment is higher than the planned investment, actual investment is greater than the planned investment.
Answer: Option (A)
(2) There is a negative relationship between the planned investment and the interest rate.
The amount of planned investment decrease if the interest rate rises from 4% to 8%.
Answer: Option (a)
(3) Aggregate output (Y) is greater than planned aggregate spending if an actual investment is greater than planned investment (or unplanned investment is positive)
Actual investment = Planned investment + unplanned inventory.
Unplanned inventory = Actual investment - planned investment.
If unplanned inventory investment is positive, then planned aggregate spending must be less than the aggregate output
Answer: Option (a)
(4) Multiplier = 1/(1-MPC)
put MPC = 0.5,
Multiplier = 1/(1-0.5) = 2
Put MPC = 0.75
Multiplier = 1/(1-0.75) = 4
an increase in MPC from 0.5 to 0.75 leads to increase multiplier from 2 to 4.
Thus a larger the MPC, a larger the multiplier
Answer: Option (b) i.e., FLASE.
Add Answer to:
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QUESTION 37 3 points Save Answer Which accurately describes unplanned investment spending? Choose all that apply...
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refer to figure 23.8. the amount of planned investment _____ if the interest rate rises from...
refer to figure 23.8. the amount of planned investment _____
if the interest rate rises from 4% to 8%
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Based on the assumptions of the aggregate expenditure model,
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