If in the Income-Expenditure Model, Firms Increase Their Investments by $100

question 144

Multiple Choice

If in the income-expenditure model, firms increase their investments by $100 billion, how do they respond to this increased investment spending initially?

• A) by increasing inventories by $100 billion
• B) by drawing down inventories and increasing production by $100 billion
• C) by increasing the price of goods and services
• D) by waiting for demand to decrease
• E) They will not respond to the increased demand, and will lose sales.

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Definitions:

Social Learning Theory

A theory that suggests people learn new behaviors through observing and imitating the actions of others, as well as through personal experiences.

Gender Schemas

Cognitive structures that dictate how individuals interpret and process information based on perceived gender roles and identities.

Selective Memory

The tendency to remember only certain details of an event or situation, often those that align with one's beliefs or attitudes.

Selective Attention

The cognitive process of focusing on certain stimuli in the environment while ignoring others.