Question 1

If actual investment is greater than planned investment,unplanned inventories decline.

Accepted Answer

If actual investment is greater than planned investment, it typically means that firms have invested more in inventories than they intended, leading to an increase in unplanned inventories, not a decline.

Question 2

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule
A)has a negative slope.
B)is horizontal.
C)is vertical.
D)has a positive slope.

Accepted Answer

If planned investment is perfectly responsive to changes in the interest rate, it means that any change in the interest rate does not affect the level of planned investment. Therefore, the planned investment schedule is horizontal, indicating that investment does not change as interest rates change.

Question 3

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule
A)has a negative slope.
B)is horizontal.
C)is vertical.
D)has a positive slope.

Accepted Answer

If planned investment is perfectly unresponsive to changes in the interest rate, then the planned investment schedule would be vertical. This is because changes in the interest rate would have no effect on the level of planned investment, and thus the schedule would remain unchanged regardless of the interest rate level.

Question 4

In macroeconomics,equilibrium is defined as that point at which
A)saving equals consumption.
B)planned aggregate expenditure equals aggregate output.
C)planned aggregate expenditure equals consumption.
D)aggregate output equals consumption minus investment.

Accepted Answer

Equilibrium in macroeconomics is defined as the point at which planned aggregate expenditure (PAE) equals aggregate output (Y). PAE includes consumption, investment, government spending, and net exports. So, when PAE equals Y, all goods and services produced are being purchased, and there are no unplanned changes in inventories.

Question 5

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals
A)consumption plus actual investment.
B)consumption plus inventory adjustment.
C)consumption minus planned investment.
D)consumption plus planned investment.

Accepted Answer

Planned aggregate expenditure consists of only consumption and planned investment as there is no consideration for government or foreign sectors in the model. Therefore, the correct answer is choice letter D, which states that planned aggregate expenditure equals consumption plus planned investment.

Question 6

If planned investment exceeds actual investment,
A)there will be an accumulation of inventories.
B)there will be no change in inventories.
C)there will be a decline in inventories.
D)none of the above

Accepted Answer

The answer of If planned investment exceeds actual investment,
A)there will...

Question 7

Related to the Economics in Practice on p.464: A recent study by economists at Yale University and the University of Chicago suggests that changing retirement plan enrollment options from "opt-in" systems to "opt-out" systems increased pension plan enrollment after three months of work from ________ percent of workers to ________ percent of workers.
A)80; 22
B)10; 100
C)65; 98
D)77; 42

Accepted Answer

According to the information given, the study suggests that changing retirement plan enrollment options from "opt-in" systems to "opt-out" systems increased pension plan enrollment after three months of work from 65 percent of workers to 98 percent of workers.

Question 8

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

Accepted Answer

This statement is a basic principle of Keynesian economics known as the "income-expenditure equilibrium" or the "savings-investment identity." In this model, an increase in planned investment (a component of aggregate demand) leads to an increase in national income and output. To restore equilibrium, total saving must also increase by the same amount as the initial increase in investment. This can occur through a variety of mechanisms, such as higher household saving, reduced consumption spending, or an increase in net exports (if the economy is open to trade).

Question 9

Firms react to negative inventory investment by increasing output.

Accepted Answer

When a firm has negative inventory investment, it means that its inventory levels are decreasing. To avoid running out of stock, firms often increase their output to replenish their inventory levels. This helps them maintain their production capacity and avoid potential losses due to stockouts. Therefore, firms react positively to negative inventory investment by increasing their output.

Question 10

If Inventory investment is higher than firms planned,
A)actual and planned investment are equal.
B)actual investment is less than planned investment.
C)actual investment is greater than planned investment.
D)actual investment must be negative.

Accepted Answer

If inventory investment is higher than firms planned, it means actual investment is greater than planned investment.

Question 11

Firms react to an unplanned inventory investment by increasing output.

Accepted Answer

Firms typically react to an unplanned inventory investment by reducing output to align production with lower-than-expected demand, not by increasing it.

Question 12

Refer to the information provided in Figure 8.7 below to answer the questions that follow.
  Figure 8.7
-Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 13

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was
A)-$115 billion.
B)-$50 billion.
C)$50 billion.
D)$230 billion.

Accepted Answer

The unplanned inventory change is the difference between actual investment and planned investment. In this case, $140 billion (actual) - $90 billion (planned) = $50 billion.

Question 14

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.
A)very little change
B)mixed results
C)significant decreases
D)dramatic increases

Accepted Answer

The article states that "early results have shown dramatic increases in the savings rates of the enrolled."

Question 15

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is
A)-$20 million.
B)$20 million.
C)$40 million.
D)$200 million.

Accepted Answer

The unplanned business investment and planned investment both add up to $20 million each, resulting in a total planned investment of $40 million. Therefore, the actual investment would be $40 million, which is the sum of both planned and unplanned investment.

Question 16

Refer to the information provided in Figure 8.8 below to answer the questions that follow.
  Figure 8.8
-Refer to Figure 8.8.The amount of planned investment decreases if the interest rate
A)drops from 8% to 4%.
B)rises from 4% to 8%.
C)remains at 8%.
D)remains at 4%.

Accepted Answer

According to the graph, as the interest rate rises from 4% to 8%, the planned investment decreases from $200 billion to $100 billion. However, if the interest rate drops from 8% to 4%, the planned investment increases from $100 billion to $200 billion. Therefore, the best choice is B.

Question 17

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Accepted Answer

Keynes did use the phrase "animal spirits" to describe the feelings of entrepreneurs and argued that these feelings can lead to changes in investment decisions.

Question 18

Refer to the information provided in Figure 8.7 below to answer the questions that follow.
  Figure 8.7
-Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

Panel B represents a fixed planned investment function since investment does not change with changes in income level. The other panels show variations in planned investment with changes in income levels, indicating a non-fixed investment function.

Question 19

Refer to the information provided in Figure 8.8 below to answer the questions that follow.
  Figure 8.8
-Refer to Figure 8.8.The amount of planned investment increases if the interest rate
A)drops from 8% to 4%.
B)rises from 4% to 8%.
C)remains at 8%.
D)remains at 4%.

Accepted Answer

According to the graph, as the interest rate drops from 8% to 4%, the amount of planned investment increases.

Question 20

Refer to the information provided in Table 8.3 below to answer the questions that follow.
Table 8.3
A Hypothetical Investment Schedule
 
-Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.
A)increase; 120
B)increase; 180
C)decrease; 120
D)decrease; 180

Accepted Answer

A drop in interest rates generally leads to an increase in planned investment. The specific increase of $120 billion is likely derived from the data in Table 8.3, which shows the relationship between interest rates and investment levels.

Quiz 8: Aggregate Expenditure and Equilibrium Output

If actual investment is greater than planned investment,unplanned inventories decline.

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule

In macroeconomics,equilibrium is defined as that point at which

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals

If planned investment exceeds actual investment,

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

Firms react to negative inventory investment by increasing output.

If Inventory investment is higher than firms planned,

Firms react to an unplanned inventory investment by increasing output.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment decreases if the interest rate

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment increases if the interest rate

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would by $ billion.

Quiz 8: Aggregate Expenditure and Equilibrium Output

If actual investment is greater than planned investment,unplanned inventories decline.

If planned investment is perfectly responsive to changes in the interest rate,the planned investment schedule

If planned investment is perfectly unresponsive to changes in the interest rate,the planned investment schedule

In macroeconomics,equilibrium is defined as that point at which

Without the government or the foreign sector in the income-expenditure model,planned aggregate expenditure equals

If planned investment exceeds actual investment,

If planned investment increases,equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment,assuming there is no government or foreign sector.

Firms react to negative inventory investment by increasing output.

If Inventory investment is higher than firms planned,

Firms react to an unplanned inventory investment by increasing output.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Farley,planned investment varies inversely with income.Farley's planned investment function is represented by

In 2012 Happyland's planned investment was $90 billion and its actual investment was $140 billion.In 2012 Happyland's unplanned inventory change was

Related to the Economics in Practice on p.464: Early results from the Save More Tomorrow retirement plans have shown ________ in the savings rates of the enrolled.

If unplanned business investment is $20 million and planned investment is $20 million,then actual investment is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment decreases if the interest rate

Keynes used the phrase animal spirits to describe the feelings of entrepreneurs,and he argued that these feelings affect investment decisions.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7.In Azora,planned investment does not vary with income.Azora's planned investment function is represented by

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8.The amount of planned investment increases if the interest rate

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would ________ by $________ billion.

Refer to the information provided in Table 8.3 below to answer the questions that follow. Table 8.3 A Hypothetical Investment Schedule -Refer to Table 8.3.If the interest rate dropped from 15% to 6%,planned investment would by $ billion.