1. Inventory investment can be: A. negative. B. zero. C. positive. D. negative,
ID: 2507470 • Letter: 1
Question
1. Inventory investment can be:A. negative. B. zero. C. positive. D. negative, zero, or positive. 2. Planned investment spending is:
A. positively related to existing productive capacity and the interest rate. B. negatively related to existing productive capacity and the interest rate. C. positively related to the interest rate and expected future GDP. D. negatively related to the interest rate and expected future GDP.
4. Scenario: Aggregate Consumption Equation
Suppose that the aggregate consumption function is given by the equation: C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. Reference: Ref 11-8
(Scenario: Aggregate Consumption Equation) If disposable income increases from $500 to $800, aggregate consumption is:
A. $840. B. $440. C. $240. D. $200. 5. If other things are equal, an increase in aggregate wealth would ________ and shift the consumption function _________.
A. increase autonomous consumption; up B. decrease the marginal propensity to consume; down C. decrease autonomous consumption; down D. increase the marginal propensity to consume; up 12. The current level of productive capacity ________________ investment spending.
A. has no impact on B. is positively related to C. is negatively related to D. varies directly with 13. The multiplier is:
A. 1 / (1 Reference: Ref 11-8 1. Inventory investment can be:
A. negative. B. zero. C. positive. D. negative, zero, or positive.
Explanation / Answer
1) D as inventory is negative in case of backorders
2) B as lower the interest rate, investors will invest more money as well as higher the existing production capacity, lower will be the requirement of investment
4) A as C = 200 + 0.8 * 800 = 840
5) A as increase in welath leads to more consumption
12) C as higher the existing production capacity, lower will be the requirement of investment
13) A as multiplier= 1/MPS=1/(1-MPC)
14) C; unplanned investment will be $200 bn
15) A as more investment spending leads to higher expected growth
18) B
21) A as slope is less than 45 deg thus amount will be less than 200
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