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Author Question: The investment function implies that current output does not influence investment. Does that make ... (Read 32 times)

chandani

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on: Jun 30, 2018
The investment function implies that current output does not influence investment. Does that make sense?
 
  What will be an ideal response?

Question 2

If households save 0.20 of each additional dollar of increased income and spend the rest, the expenditure multiplier will be
 
  A) 1.25.
  B) 2.
  C) 5.
  D) 8.


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aidanmbrowne

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Yes. Planned investment relies mostly on business expectations of future economic activity. Fluctuations in current activity affect investment as unplanned inventory changes and, perhaps, as an updating of expectations, causing a change in autonomous investment.

Answer to Question 2

C


chandani

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Reply 2 on: Jun 30, 2018
Great answer, keep it coming :)

dyrone

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Reply 3 on: Yesterday
Gracias!

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