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3 years ago

For an economy starting at potential output, a decrease in planned investment in the short run results in a(n):

Business

1 answer:

Kruka [31]3 years ago

6 0

Question:

For an economy starting at potential output, a decrease in autonomous expenditure in the short-run results in a(n):

A. increase in potential output

B. recessionary output gap

C. decrease in potential output

D. expansionary output gap

Answer:

The correct answer is B

Explanation:

A decrease in autonomous expenditure shifts the Planned Aggregate Expenditure curve downward thus creating a lower equilibrium output.

PAE = C + Ip + G + NX

where

PAE = Planned Aggregate Expenditure

C = consumption

Ip = Investment Spending

G = Government Spending

NX = Net Export

If an economy has its output equal to its potential, this will create a reduction in short-run equilibrium output leading to a recessionary output gap.

Cheers!

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2 years ago

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2 years ago

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus

alina1380 [7]

Answer:

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Given that

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3 years ago

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