Question

ccording to our discussion in class, sinice govemment spending may be the result of olitical decisions it is often referred to as being a wasteful b. in abundance c excessive Consider the consumption function COY10+2Y What is the level of autonomous consumption? Suppose disposable income is 1 a. 2 b. 0 c. 40 d. 10 Suppose inventories accumulate so firms realize escessive inventories concluded that aggregate expenditure must have It can be b. increased c. stayed the same d. cannot be determined with given information Suppose aggregate expenditures decrease. It can be concluded that layoffs will tend to c stay the same d carmot be determined with given information ggregate expenditures decrease. It can be concluded that unemployment w tend to b increase c. stay the same d cannot be determined with given information ㄥ

Answer 1

2 )

Answer: ( d)

Autonomous expenditure decision is taken by the government. It does not depend on economic incentives. Such expenditure decision is often taken to counter cyclical occurrences.

3)

Autonomous consumption does not depend on the level of income. 10 is autonomous consumption level.

Answer: (d)

4)

Answer: ( a)

Inventory rises if there is not enough demand in market. Thus, expenditure decreases.

5)

Answer: ( b)

Fall in expenditure will lead to all in aggregate demand. It will reduce output level and eventually there is fall in employment opportunities.

6)

Answer: ( b)

Decline in aggregate expenditure will lead to fall in output level. And less people will be employed.