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:

MPS

The marginal propensity to save, which is the proportion of an additional unit of income that is saved rather than spent.

Induced Consumption

Consumer spending that increases as disposable income rises, and decreases as disposable income falls.

Trillion

Trillion is a numerical value represented as 1,000,000,000,000 (10^12), commonly used to quantify large figures such as government budgets, economics, and astronomy.

Induced Consumption

Spending by consumers that varies with income, meaning as income increases, consumption also increases, and vice versa.