Use the following to answer question 16: Figure: Income-Expenditure Equilibrium

Question

Use the following to answer question 16: Figure: Income-Expenditure Equilibrium Planned aggregate spending, AEpanned (billions of dollars) $4,000 3,500 3,000 45-degree ine, AEpanned 2.000 1,000 800 0 $500 1,000 1,500 2,000 2.500 3,000 3,500 4,000 Real GDP (billions of dollars) 16. Figure: Income-Expenditure Equilibrium) According to the figure Income-Expenditure Equilibrium, if planned investment spending increases in this economy, then (other things constant) the: A) Planned (Total) Expenditure (AE) curve will shift up, increasing the income-expenditure equilibrium. Planned (Total) Expenditure (AE) curve will shit down, decreasing the income-expenditure equilibrium. government's budget deficit will rise. supply of saving must fall. B) C) D) Use the following to answer question 17: Person Pat Lucy Kiana Year 1991 2000 CPI 84 52,000 S 61,000 $ 66,000 S 72,000 100 120 Alex200493

Explanation / Answer

16.

If planned investment spending increases in this economy, then the:

A) planned (total) expenditure (AE) curve will shifts up, increasing the income - expenditure equilibrium.

This is becuase, when the planned investment spending increases, then planned expenditure also increases.

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