Why would an increase in planned investment increase real GDP, but an unplanned increase in inventory investment decrease real GDP in the aggregate expenditure model?

Q: Consider two economies (1 and 2) where in equilibrium, the level of aggregate income (Y) is the sum…

A: Aggregate income is the sum total of all the incomes in an economy without adjustments.  As given in…

Q: (Multipliers) Suppose investment, in addition to having an autonomous component, also has a…

A: It has been stated that investment has a component that varies directly with the level of real GDP…

Q: Real GDP C G NX 2500 1430 540 400 90 2400 1360 540 400 100 2300 1290 540 400 110 2200 1220 540 400…

A: Note: Since, you've posted question with multiple sub-parts, we will solve the first the first three…

Q: Why can’t an economy with an MPC greater than 1 reach a stable equilibrium in the aggregate…

A: The marginal propensity to consume refers to the increase in consumption expenditure with an…

Q: Aggregate consumption varies less than GDP and aggregate investment varies more. Can you reconcile…

A: As the real GDP declines, the growth rate of the economy slows down. This decrease is assumed to be…

Q: Assume that the MPC is 0.9 and investment falls by $30 billion. What is the change in real GDP?

A: mpc is 0.9. Multiplier(M)= 1/1-mpc

Q: Assume potential GDP is 3,500 and actual GDP is 3,000. If the consumption function is C=250+0.75Yd,…

A: Goods market is in equilibrium when aggregate demand and aggregate supply will be equal . And we…

Q: In the short-run aggregate expenditure model, if GDP is less than aggregate planned expenditures,…

A: The correct solution is option b.

Q: Assume a simple model with no government or foreign sector. If an increase in autonomous investment…

A: Here, it is given that change in expenditure (investment) is 100 due to which income (consumption)…

Q: An increase in autonomous consumption, an increase in disposable income, or a decrease in the…

A: Autonomous consumption is that which is independent of the consumer's income level.  Disposable…

Q: What does the 45-degree line in the Aggregate Expenditures model represent? 1. a reference line…

A: The equilibrium national income is represented by the equation Y = E.  Where, Y = Income E =…

Q: Consumption spending is more volatile than investment spending, because consumption spending…

A: Note: In the BNED Guidance, only the first question can be answered at a time. Resend the question…

Q: Suppose that autonomous consumption is 2,190, government purchases are 590, taxes are 0, planned…

A: An autonomous spending depicts the parts of an economy's total use that are not influenced by that…

Q: The current value of Real GDP is greater than the equilibrium level of Real GDP. This implies that…

A: The macroeconomic equilbrium in an economy occurs when the aggregate demand and aggregate supply are…

Q: Given C=500 + 0.80Y and I = 100 and C and I are the only components of AD.   Based on the…

A: Given : C=500 + 0.80Y  I = 100

Q: In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the…

A: It is given that the autonomous consumption in the Keynesian land is $50 million. This means that…

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: What will be the impact on real GDP?

A: Investment determined independently of changes in income is known as Autonomous Investment. Marginal…

Q: Given the following set of equations for an economy model: Consumption expenditure Investment C =…

A: Y = C + I +G + M  Y = (A* + b YD) + I* -lr + M Y = A* + b (Y - T* - tY ) + I* - lr + M* + mY Y = A*…

Q: Using the income-expenditure model, what is the expected effect (increase, decrease, or no effect)…

A: Income-expenditure method: It refers to the model under which the fluctuations and spending are…

Q: Suppose the consumption of an economy is given by C = 20 +0.6Y The following investment function is…

A:

Q: In an economy, income rises by $10,000 as a result of rise in investment Expenditure by $1000.…

A: The given information is as follows:- Rise in income = $10,000 Rise in investment expenditure =…

Q: he following are the components of aggregate demand EXCEPT,   A) government spending. B)…

A: The Answer is given below

Q: Q.1.13 An increase in the marginal propensity to consume: (1) Shift the aggregate spending function…

A: Since you have posted multiple questions as per the guidelines we can solve only one at a time.

Q: Find autonomous Expenditure from the following:- Autonomous consumption = $200  Marginal…

A: # The consumption expenditure for the household is considered to be as the goods and services on…

Q: Needs-tested spending O increases as real GDP increases. O makes recessions more severe.

A: All government, investment, consumption, and transfer payments are added up in government…

Q: If aggregate expenditure is greater than real GDP, we could expect which of the following to occur?…

A: Aggregate expenditure(AE) is the value of the finished goods and services in the economy. It…

Q: Assume that autonomous consumption is $1,625 billionand disposable income is $11,500 billion.…

A: Consumption expenditure refers to the spending on consumption out of disposable income. When…

Q: Why can’t an economy with a MPC greater than one reach a stable equilibrium in the aggregate…

A:

Q: Insert the missing word or phrase: When planned aggregate spending does NOT equal current GDP,…

A: Aggregate Spending is the aggregate expenditure which is sum of consumption and investment.

Q: Aggregate Expenditures and Multipliers Assignment a. Using the aggregate expenditure function…

A: Answer: (a). The current level of real GDP is that where the 45-degree line and the aggregate…

Q: If disposable income is 90 percent of national income, the marginal propensity to consume ( out of…

A: From the given information: Disposable income = 90% of national income The marginal propensity to…

Q: Suppose that a certain country has an MPC of .9 and a real GDP of $400 billion. If its investment…

A: The total production of good and services across the sectors of economy in a particular period of…

Q: Calculate investment expenditure from the following data about an economy which in equilibrium:…

A: According to question we are given that  National income = $1000 Marginal propensity to save =$0.25…

Q: if investment spending at each level of output increases by $120 billion, what will equilibrium…

A: Equilibrium Output is the amount of output in an economy where Aggregate Demand equals Aggregate…

Q: Which of the following will increase consumption spending? Group of answer choices a housing market…

A: To Find: What Increases Consumption Spending Given Options: A Housing Market Crash An Increase…

Q: Which of the following correctly describes how a decrease in the price level affects consumption…

A: Decline in price level means decline in the prices of goods and services.  It means that value of…

Q: Which of the following statements is/are true? If aggregate expenditure is equal to total income,…

A: Aggregate expenditure(AE) refers to the value of all goods(G) and services(S) in the current period.…

Q: Based on Aggregate Expenditure (AE) model if aggregate expenditure is less than GDP, what will…

A: Aggregate expenditures are the amount spent in the economy which forms through the planned…

Q: An economy is in equilibrium. Its national is Rs. 5,000 and autonomous consumption expenditure is…

A: Consumption expenditure refers to the level of expenditure incurred by the household in an economy…

Q: The following table shows consumption (C), investment spending (I), and government purchases (G), in…

A: If the income tax rate is 25%, the disposable income (after tax) is equal to 75% of the real GDP.…

Q: As a result of increase in investment by $125, national income increases by $500. Calculate marginal…

A: Given that  Change in investment = $125 CHange in national income =$500 We have to calculate…