Use the Following to Answer Questions

question 31

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Expenditures (AE) in a Simplified Economy

-(Exhibit: Aggregate Expenditures (AE) in a Simplified Economy) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment. Consider a simple economy that is made up of only two sectors, households and firms, and that all investment is autonomous. Further, disposable personal income = real GDP. Suppose autonomous investment rises by $50 billion. In the short run, this will cause

• A) an increase in equilibrium AE of $100 billion, a shift to the right of the aggregate demand (A
• D) curve of $100 billion, and an increase in Y of more than $100 billion.
• B) an increase in autonomous AE of $50 billion, a shift to the right of the AD curve of $100 billion, and an increase in Y of less than $100 billion.
• C) an increase in autonomous AE of $50 billion, a shift to the right of the AD curve of $100 billion, and an increase in Y of more than $200 billion.
• D) an increase in equilibrium AE of $50 billion, a shift to the right of the AD curve of $300 billion, and an increase in Y of less than $300 billion.

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Definitions:

Superego

In psychoanalytic theory, the part of the mind that consists of the conscience and the individual’s system of internalized rules of conduct, or morality.

Psychoanalytic Theory

A theory in psychology originated by Sigmund Freud, which posits that human behavior is the result of interactions among the id, ego, and superego, within the context of sexual and aggressive drives.

Ego

In psychoanalytic theory, the relatively rational part of the mind that balances the competing claims of the id, the superego, and reality.

Id

In psychoanalytic theory, the repository of the drives, the emotions, and the primitive, unconscious part of the mind that wants everything now.