If an Economy at the Equilibrium Level of GDP Experiences

question 66

Multiple Choice

If an economy at the equilibrium level of GDP experiences an increase in the amount of investment spending, then inventories will be

• A)depleted, causing firms to cut production.
• B)accumulated, causing firms to cut production.
• C)depleted, causing firms to increase production.
• D)accumulated, causing firms to expand production.

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Definitions:

Traveler's Checks

A preprinted, fixed-amount check designed to allow the person signing it to make an unconditional payment to someone else as a result of its being counter-signed.

M2

A gauge of the total money available that encompasses physical currency, deposits in checking accounts, and near money assets like savings accounts and money market investments, which can be quickly converted to cash.

Savings Deposits

Accounts at banks or financial institutions where individuals can deposit their money to earn interest over time.

Demand Deposits

Bank accounts from which deposited funds can be withdrawn at any time without any notice to the bank.