Use the Following to Answer Questions

question 186

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:

Nickel Production

The process of extracting nickel ores from the ground and refining them into pure nickel, used in various industrial applications.

Deferred Tax

A tax liability or asset that arises due to the temporary differences between the accounting income and the taxable income.

Goodwill

The value attributed to a company's brand name, customer relationships, and other intangible assets that are not separately identifiable.

Liabilities

are present financial obligations arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.