In Most Derivations of the Aggregate Expenditures Model, Investment Is

question 46

Multiple Choice

In most derivations of the aggregate expenditures model, investment is assumed to be independent of real GDP.What would be the effect on the aggregate expenditures (AE) function if investment spending were positively related to income?

• A)The intercept of the AE function would rise.
• B)The slope of the AE function would become flatter.
• C)Both the slope and the intercept of the AE function would increase.
• D)The slope of the AE function would become steeper.
• E)The intercept of the AE function would increase, and its slope would become flatter.

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Definitions:

Timing

The selection of a specific time or rate when certain financial actions are to be taken or investments made.

Future Payments

Future payments refer to money that will be paid at a forthcoming date as a result of contractual obligations or anticipated transactions.

Interest Rate

The fraction of a loan that is assessed as interest for the borrower, often shown as a yearly percentage.

Interest Rate

The cost of borrowing money, expressed as a percentage of the amount borrowed.