Use the Following to Answer Questions

question 177

Multiple Choice

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

-(Exhibit: Aggregate Expenditures (AE)
In a Simplified Economy)
Consider a simple economy that is made up of only two sectors, households and firms, and that investment is autonomous.Further, disposable personal income = real GDP.Suppose that actual real GDP in this economy is $500 billion in a particular period.We would expect to see

• A)unintended reductions in inventory, planned investment will exceed actual investment.
• B)unintended reductions in inventory, planned investment will be less than actual investment.
• C)unintended increases in inventory, planned investment will exceed actual investment.
• D)unintended increases in inventory, planned investment will be less than actual investment.

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Definitions:

State Unemployment Tax Rate

The rate at which employers are taxed by their state government to fund unemployment insurance benefits for laid-off workers.

Federal Unemployment Tax Rate

The percentage rate at which employers are taxed by the federal government to fund the unemployment benefits pool.

FICA Tax Rates

The percentage rates set by law that determine the amount of Social Security and Medicare taxes that must be withheld from employees' paychecks and matched by employers.

Employer's Taxes

Taxes that employers are required to pay on behalf of their employees, such as social security and Medicare taxes in the United States.