Answer: Option B
Explanation: In simple words, spending multiplier refers to the effect that the spending from the govt have on an economy. As per this effect, if the govt. spends a little on the economy the multiplier effect will come into force and make a major impact on the organisation.
Government spending refers to the total outflow of resources made by the govt. for the betterment of economy. However the decrease in tax will not directly be considered an outflow but it surely does increase their revenue leading to more demand in the economy.
Hence from the above we can conclude that the correct option is B .
Answer:
the money supply in Macroland will increase from <u>5,000</u> econs to <u>7,000</u> econs
Explanation:
Currently, Macroland's money supply = 2,000 econs held by the public and 3,000 econs held by the banks (= 300 econs x 1/0.1).
In order to determine the increase in the money supply we must multiply the inflow of econs by the money multiplier. The money multiplier = 1 / reserve ratio = 1/0.1 = 10.
Since the government is injecting 200 econs to the economy, the increase in the money supply = 200 econs x 10 = 2,000 econs.
So now, Macroland's money supply will increase from 5,000 to 7,000 econs.
The money multiplier measures the banking system's ability to "create" money. The banking system creates money by first receiving deposits, e.g. you deposit 10 econs in your savings account, and then lending money to another client. The bank will lend 9 econs (-10% required reserve) to John that will purchase a bike. The seller of the bike receives the money form John and deposits the 9 econs in his own bank. Then this second bank will lend 8.10 econs to Sarah. Sarah will use the money to purchase a new computer and a printer from Tom. Tom then deposits the money in his bank, and then his bank lends 7.29 econs to Sally, and the wheel goes on and on.
This money creating process is possible because Macroland uses a fractional banking system, which means that the banks are only required to keep a fraction of total deposits as reserves.
Answer:
A period in which the economy is growing at a rate significantly above normal.
Explanation:
The economy experiences relatively fast growth during the expansion process, interest rates continue to be small, output rises and inflationary pressures are building up. Once the economy reaches a low point, the cycle peak is reached, and development starts to recover.
Expansion is sometimes described as the first step in the business cycle, but this is an arbitrary point of departure, here the economy has a constant stream in the supply of capital, and the investment booms.
Answer:
$1,120
Explanation:
Ending Merchandise Inventory is value of closing inventory in hand, to be valued at lower of cost or net realizable value or replacement value
Here, cost of closing inventory = 7 units X $160 each = $1,120
Since current realizable/ replacement value = $1,155
Cost is less than realizable value, therefore cost will be considered.
Thus ending merchandise inventory will be valued at total of $1,120.
Answer:
As the price level rises, imports become relatively cheaper than domestically produced goods.
Explanation:
The aggregate demand curve is a graph showing the total quantity of all goods and services demanded by an economy at different price levels.
As price level increases, the cost of domestic goods increases and imports become cheaper. As a result, the demand for domestic goods falls as price level falls and the demand for imported goods increases.