If an inflationary gap exists, what will happen to business inventories?  How will producers respond?

Q: Can you explain how expectations about future prices and incomes will affect consumption?

A: Consumption measures the total consumption spending by the households on different goods and…

Q: Choose two factors that could cause AD to shift in the months to come and explain the direction of…

A: Aggregate demand is the total purchase of final goods and service by all sectors in the economy…

Q: What are the various factors which influence propensity to consume

A: Marginal propensity to consume is the ratio of change in consumption to the change in income  MPC =…

Q: What is the marginal propensity to consume, and how is it related to the marginal propensity to…

A: Marginal propensity to consume refers to the amount of pay spend by the consumer in consumption of…

Q: Please  explain and discuss supply-side economics.

A: Supply-Side Economics helps in increasing aggregate supply (AS). supply-side also helps in creasing…

Q: According to Keynes, when the price level rises, it causes the interest rate to do what? It causes…

A: Money Demand: - The demand for money is the individual's desire to keep their assets in the form of…

Q: Which of the following would not increase Aggregate Demand? a. Increased Consumption b. Increased…

A: Aggregate demand is given by  AD= C+I+G+NX Where C is consumption I is investment G is government…

Q: How do changes in government spending and taxes affect the equilibrium price level and real GDP?

A: In an economy, equilibrium level of real GDP is determined by the intersection of aggregate demand…

Q: How does an increase in government transfer payments affect aggregate demand

A: The government spending considers the government purchase on goods and services; but the government…

Q: Explain and illustrate graphically recessionary and inflationary gaps.

A: The aggregate demand curve(AD) shows a different combination of quantity of real GDP demanded and…

Q: Which of the following components of consumption spending typically sees the largest decline in…

A: A recession is a time of financial compression rather than development. During such periods, the…

Q: If the price level decreases, what will happen to the level of real GDP supplied?   It will usually…

A: Real GDP: It is used to measure the value of economic output that is adjusted for price changes.

Q: True or False (Why?): An increase in the money supply tends to decrease expenditures on consumption…

A: To answer whether the statement is true or false.

Q: Describe the possible effects of falling prices on equilibrium income?

A: Equilibrium income is reached when the economy comes with an equal amount of production and market…

Q: False : A recessionary gap can be caused by consumers who spend more than the

A: Recessive gap. Occurs when real GDP (more than full employment) falls below potential GDP, which…

Q: Using an AD-AS diagram, explain what happens if personal income taxes increase.

A: Increase in personal tax decreases disposable income, which decreases consumption spending, thus…

Q: Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or…

A: The total supply of goods and services that companies in a national economy expect to sell over a…

Q: Consumer spending fell significantly at the start of the pandemic by 13.6%, but increased by 5.6% in…

A: A recession is characterized as a prolonged period of low or negative real GDP (output) growth,…

Q: Can demand management policies be used to combat stagflation? Explain your answer.

A: Answer in step 2

Q: If planned expenditures are below actual production, what will happen to income?  Explain the…

A: If planned expenditure is below than the actual production, then the income will decrease. Because,…

Q: Suppose there are no imports, taxes or other leakages in the economy. If the Marginal Propensity to…

A:

Q: Income is 678 Trillion and consumption is 662 Trillion then income increases to 698 Trillion and…

A: The marginal propensity to consume can be defined as the ratio of the change in the spending on…

Q: How does an increase in wealth effect the price level and real GDP?

A: An accumulation of valuable economic resources that may be valued in terms of physical products or…

Q: If the supply of petroleum were reduced by petroleum firms due to rising inventories, we can expect…

A: Price is determined by interaction of supply and demand curve.

Q: the question is true or false: "An increase in business investment spending has the same effect on…

A: Aggregate demand is the total quantity of commodities that the consumers are willing to buy at…

Q: If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls,what…

A: Keynes postulated that there is a difference between the short-run and the long-run supply curve of…

Q: From the information below calculate aggregate demand; Consumption (C) = $200 + 0.6Y…

A: Aggregate demand refers to the total quantity of demand for all finished goods and services produced…

Q: 4, which expenditure level will cause an inflationary gap?

A: Inflationary gap is a situation where aggregate demand is higher than aggregate supply.

Q: Three ways to increase Consumption which would cause a shift right in the AD curve would be or or

A: At different price levels, the aggregate demand curve depicts the total quantity of all commodities…

Q: When households cut back on their spending, then in the short run we tend to see the price level…

A: In an economy, households play significant role to determine the equilibrium price and output…