Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 29, Problem 4MCQ
To determine
To select:
The option that correctly states the effect of increase in expected future income.
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Consumption spending was $150$150 billion, investment spending was $40$40 billion, government spending was $50$50 billion, spending on exports was $42$42billion, and spending on imports was $35$35 billion. The price level increases, resulting in a decline in investment spending by 30%30%. Consumption spending decreases by 10%10%.If other factors stay at the same level, determine aggregate demand after the price level increased. Enter your answer in the box below.
Aggregate demand (AD) is A,B,C, OR D
A
total spending, economy-wide, on durable goods and services.
B
total spending, economy-wide, on domestic goods and services.
C
equal to C + I + G + (M - X).
D
total unplanned expenditure.
Investment spending expansion O Declines; increases O Declines; declines Increases; increases O Increases; decline during an recession and during an
Chapter 29 Solutions
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
Ch. 29 - Prob. 1SPPACh. 29 - Prob. 2SPPACh. 29 - Prob. 3SPPACh. 29 - Prob. 4SPPACh. 29 - Prob. 5SPPACh. 29 - Prob. 6SPPACh. 29 - Prob. 7SPPACh. 29 - Prob. 8SPPACh. 29 - Prob. 9SPPACh. 29 - Prob. 10SPPA
Ch. 29 - Prob. 11SPPACh. 29 - Prob. 1IAPACh. 29 - Prob. 2IAPACh. 29 - Prob. 3IAPACh. 29 - Prob. 4IAPACh. 29 - Prob. 5IAPACh. 29 - Prob. 6IAPACh. 29 - Prob. 7IAPACh. 29 - Prob. 8IAPACh. 29 - Prob. 9IAPACh. 29 - Prob. 10IAPACh. 29 - Prob. 1MCQCh. 29 - Prob. 2MCQCh. 29 - Prob. 3MCQCh. 29 - Prob. 4MCQCh. 29 - Prob. 5MCQCh. 29 - Prob. 6MCQCh. 29 - Prob. 7MCQ
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Similar questions
- If investment increases by $50 billion, by how much will aggregate demand change? Aggregate demand will _______. A. increase by less than $50 billion because there will be fewer goods and services produced for consumption expenditure B. increase by more than $50 billion because the increase in aggregate income induces an increase in consumption expenditure C. probably decrease by $50 billion, but it depends on the change in aggregate supply D. increase by exactly $50 billion because investment is a component of aggregate demandarrow_forwardThe components of aggregate demand are: The components of aggregate demand are: A. consumption, investment, government and exports B. consumption, investment, government and imports C. consumption, investment, government and net exports D. consumption, investment, and net exports, since only private expenditures are includedarrow_forwardWhich of the following is a reason why increases in the price level results in a decline in aggregate expenditure? Price level increases raise real wealth which causes consumption spending and aggregate expenditures to decline. Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditures. Price level increases in the U.S. relative to other countries, raise net exports, which lowers aggregate expenditures. As the price level rises, government spending falls, which lowers aggregate expenditures.arrow_forward
- TRUE/FALSE If aggregate expenditures exceed aggregate income then inventories will rise and firms will eventually lay off workers.arrow_forwardWhen comparing an increase in government spending on goods and services to an increase in private investment spending, in the short run Group of answer choices they will both shift aggregate supply. government spending will shift the aggregate demand and private investment the aggregate supply. government spending is inflationary; private investment is not. they will both shift aggregate demand.arrow_forwardA rising price level should shift the expenditure schedule a. upward and decrease equilibrium real GDP. b. upward and increase equilibrium real GDP. c. downward and increase equilibrium real GDP. d. downward and decrease equilibrium real GDP.arrow_forward
- When the economy is in recession and below potential GDP, more of the increase in aggregate demand A. is due to increases in saving than increases in business spending. B. is due to increases in business spending than increases in exports C. increases real GDP D. drives up pricesarrow_forwardIn order to break stagflation, the government has to increase expenditure on food subsidies in the form of food vouchers, unemployment benefits or allowances, wages subsidy to increase household consumption expenditure and boost up the AD. With increased consumption expenditure, aggregate demand will rise, which would send a signal to the aggregate supply (AS) to raise production. This will create a positive effect, which will bring the economy out of recession. Show this in a graph.arrow_forwardOne of the following cannot be considered as a factor that affect consumption Select one: a. Price expectations b. None of the options are correct c. Wealth d. Interest ratesarrow_forward
- Identify how each of the following changes will affect Aggregate Demand An increase in consumers disposable income A decrease in Investment spending due to pessimistic forecasts concerning the future A global pandemic resulting in business closures and an increase in the unemployment level The federal government increases spending on roads, bridges, and school repairs The federal government reduces the federal income tax resulting in an increase in household disposable incomearrow_forwardKeynesian economics predicts that if government policy makers deem current equilibrium real Gross Domestic Product (GDP) to be "too low," then an appropriate policy action would be to do nothing, because the economy is self-adjusting. raise government spending, thereby increasing aggregate demand and pushing up real Gross Domestic Product (GDP) with little or no inflationary consequences. increase taxes, thereby causing aggregate demand to increase and inducing a rise in real Gross Domestic Product (GDP) with little or no inflationary consequences. reduce the money stock, thereby causing aggregate demand to decrease and inducing a rise in fall in the price level that generates an increase in total planned expenditures.arrow_forwardIf the use of AI increases demand for computers, software, servers, then this is an increase in ___________ would which shift ____________. consumption, short-run aggregate supply up/left investment, AD to the right investment, short-run aggregate supply down/right investment, AD to the left A sustained rise in stock market prices creates _____________ which would shift __________. an increase in wealth, the AD curve to the right a higher government budget deficit, the AD curve to the left a decrease in wealth, the AD curve to the left an increase in capital productivity, the AD curve to the rightarrow_forward
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