Answer to Question #139558 in Macroeconomics for Hussien

Question

3. Suppose the economy is in income–expenditure equilibrium. How will each of the following situations affect planned investment and unplanned inventory investment?
a. The Federal Reserve decreases interest rates.
b. Major economic indicators decrease business optimism about growth in real GDP.
4. In a simple, closed economy (no government and no foreign sector), autonomous consumer spending is $100 and planned investment spending is $300. The marginal propensity to consume is 0.75.
Page 1

a. Solve for the equilibrium level of real GDP.
b. If real GDP is $2,000, what is unplanned inventory investment?

Answer 1

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