This topic contains a solution. Click here to go to the answer

Author Question: Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to ... (Read 94 times)

Brittanyd9008

  • Hero Member
  • *****
  • Posts: 500
Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?
 
  What will be an ideal response?

Question 2

A decrease in people's disposable income
 
  A) increases saving and decrease consumption.
  B) increases saving.
  C) increases investment demand.
  D) decreases saving.
  E) increases consumption.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ttt030911

  • Sr. Member
  • ****
  • Posts: 315
Answer to Question 1

If the GDP and aggregate planned expenditure are equal, then there is an equilibrium. But if aggregate planned expenditure is not equal to real GDP, the economy is out of equilibrium. If aggregate planned expenditure is greater than real GDP, then households, firms, and governments plan to buy more goods and services than firms are producing. Firms meet the extra demand by allowing their inventories to decrease. The decrease is unplanned on the part of firms. So when aggregate planned expenditure exceeds real GDP, there is an unplanned decrease in inventories. Similarly, if aggregate planned expenditure is less than real GDP, households, firms, and governments plan to buy less than firms produce and so there is an unplanned increase in firms' inventories.

Answer to Question 2

D




Brittanyd9008

  • Member
  • Posts: 500
Reply 2 on: Jun 29, 2018
Wow, this really help


Dominic

  • Member
  • Posts: 328
Reply 3 on: Yesterday
Gracias!

 

Did you know?

Essential fatty acids have been shown to be effective against ulcers, asthma, dental cavities, and skin disorders such as acne.

Did you know?

Human stomach acid is strong enough to dissolve small pieces of metal such as razor blades or staples.

Did you know?

The toxic levels for lithium carbonate are close to the therapeutic levels. Signs of toxicity include fine hand tremor, polyuria, mild thirst, nausea, general discomfort, diarrhea, vomiting, drowsiness, muscular weakness, lack of coordination, ataxia, giddiness, tinnitus, and blurred vision.

Did you know?

Patients who have been on total parenteral nutrition for more than a few days may need to have foods gradually reintroduced to give the digestive tract time to start working again.

Did you know?

IgA antibodies protect body surfaces exposed to outside foreign substances. IgG antibodies are found in all body fluids. IgM antibodies are the first type of antibody made in response to an infection. IgE antibody levels are often high in people with allergies. IgD antibodies are found in tissues lining the abdomen and chest.

For a complete list of videos, visit our video library