x, xA - 2 AvT NormalT No Spac. Heading 1Heading 2TitleSeFontParagraphStylesEdi... I 1 D I2.. I... 3.I 4 I6.3. Why will a reduction in the real interest rate increase investment spending, other things equal?4. How is it possible for investment spending to increase even in a period in which the real interestrate rises?5. Why is investment spending unstable?6. Is the relationship between changes in spending and changes in real GDP in the multiplier effecta direct (positive) relationship or is it an inverse (negative) relationship? How does the size ofthe multiplier relate to the size of the MPC? The MPS? What is the logic of the multiplier-MPCrelationship?7. Why is the actual multiplier in the U.S. economy less than the multiplier in this chapter'sexample?CHAPTER 11 QUESTIONS1.True or False: The aggregate expenditures model assumes flexible prices.2. If total spending is just sufficient to purchase an economy's output, then the economy is:A. In equilibrium.B. In recession.C. In debt.D. In expansion.3.True or False: If spending exceeds output, real GDP will decline as firms cut back on production.sales and firms will respond by4. If inventories unexpectedly rise, then production目OutnutDFocusnited States)a ParagraphStyles2D. In expansion.3. True or False: If spending exceeds output, real GDP will decline as firms cut back on production.4.If inventories unexpectedly rise, then productionsales and firms will respond byoutput.A. Trails; expanding.B. Trails; reducing.C. Exceeds; expanding.D. Exceeds; reducing.If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase by:A. $2 billion.5.B. $3 billion.C. $8 billion.D. $15 billion.E. None of the above.

Hi! thankyou for the question but as per the guidelines, we answer one question at one time. Kindly…

Answered: 5. If the multiplier is 5 and…

5. If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase by: A. $2 billion. B. $3 billion. C. $8 billion. D. $15 billion. E. None of the above.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3. When the following event occurs, the change in Real GDP = Event: The government increases its education funding by $60 billion; the marginal propensity to consume is 0.6. the multiplier.
10. T/F/U. Fear of a recession causes a decrease in investment spending—I— which in turn impacts v. Draw a graph consistent with your answer.
Multiplier Effect Question, Initial investment of 2 billion and getting 9 billion in total revenue after reinvestment
if the government cuts taxes in period 1 and cuts government spending in period 2 - this will increase the disposable income of the consumers - won't this increase consumption for consumers having an ambiguous effect on private saving. this is because if consumption is a normal good - increasing the income - positive income effect. My question is for some reason if consumer' disposable income increases - doesnn't this mean consumption must increase - whether it increases more/ enough to neutralise the tax cut effect is debatable and situation dependent - but surely there is an ambiguous effect on private saving for this reason
2. Determine the multiplier and the net effect of the following autonomous changes in spending: a. An influx of $100 billion in government spending when the marginal propensity to consume is 0.75. b. An influx of $250 billion in business investment when the marginal propensity to consume is 0.5. C. An influx of $180 billion in export sales revenue when the marginal propensity to consume is 0.8.
What will be the impact on the spending multiplier if the marginal propensity to save (MPS) increases? A.The spending multiplier will increase. B.The spending multiplier will remain unaffected. C.The spending multiplier will decrease. D.The impact on the spending multiplier cannot be determined.
multiplier? 3. Draw a graph representing a hypothetical economy. Carefully label the two axes, the S+ T+ IM curve, the I+G+ EX curve, and the equilibrium level of real GDP. Illustrate the effect of an increase in the level of autonomous saving.
What is the multiplier effect in economics? A. The tendency of consumers to save rather than spend B. The tendency of firms to reduce production during a recession C. The amplification of changes in spending through the economy D. The reduction of government spending to control inflation