If the Spending Multiplier Is Greater Than 1

question 115

Multiple Choice

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:

• A)equilibrium investment to increase by less than $200 billion.
• B)equilibrium investment to decrease by more than $200 billion.
• C)equilibrium real GDP demanded to increase by more than $200 billion.
• D)equilibrium real GDP demanded to decrease by less than $200 billion.
• E)equilibrium saving to decrease by more than $200 billion.

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Definitions:

Level Strategy

An inventory management strategy where production rates or workforce levels are kept constant despite demand fluctuations.

Formal Planning Model

A structured approach to planning that involves systematic procedures and methodologies to achieve specified objectives.

Pure Level Strategy

A production strategy where the output rates are kept constant and inventory is used to absorb fluctuations in demand.

Aggregate Planning

The process of creating a production plan to meet demand over a medium-term horizon by adjusting production rates, workforce levels, and inventory levels.