Practice Questions
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Which of the following actions is considered private investment and can lead to an increase in GDP?
When a company buys new machines, it helps them make more products. Other options are incorrect because Buying a home is important, but it is not priv...
How does an increase in investment spending affect GDP in the context of fiscal policy?
When businesses invest more money, they buy new equipment or build new places. Other options are incorrect because Some think that higher interest rat...
How does an increase in investment spending on capital goods affect GDP in an economy?
When businesses spend more on capital goods, like machines or buildings, they create more products. Other options are incorrect because Some might thi...
How does an increase in investment spending on capital goods affect GDP, particularly when considering changes in net exports?
When businesses invest in capital goods, like machines, they can produce more. Other options are incorrect because This answer suggests that buying mo...
How does an increase in investment spending influence GDP growth in the context of fiscal policy and economic indicators?
When businesses invest more money, they buy new equipment and hire more workers. Other options are incorrect because Some might think that higher taxe...
What effect does an increase in investment spending have on a country's GDP?
When businesses spend more money to buy things like machines or buildings, it helps the economy grow. Other options are incorrect because Some might t...
What is the relationship between investment spending and GDP change?
When businesses invest more money, they buy new equipment and hire more workers. Other options are incorrect because Some might think that spending le...
What effect does an increase in investment spending generally have on GDP?
When businesses spend more money on things like new buildings or equipment, it helps the economy grow. Other options are incorrect because Some might ...
Investment spending is to GDP growth as a seed is to what?
Investment spending helps the economy grow, just like a seed helps a tree grow. Other options are incorrect because Some might think soil fertility is...
Arrange the following steps to demonstrate how an increase in investment spending leads to a change in real GDP through the multiplier effect:
The first step is to identify the initial increase in investment spending. Other options are incorrect because Calculating the marginal propensity to ...
A government decides to stimulate the economy by increasing investment spending by $300 billion. If the marginal propensity to save (MPS) is 0.25, what is the expected increase in real GDP, and how does this illustrate the multiplier effect?
The GDP will increase by $1.2 trillion. Other options are incorrect because This answer suggests a simple 2:1 ratio; This answer shows a misunderstand...
A government decides to increase its investment spending by $100 billion to stimulate economic growth. If the marginal propensity to save (MPS) is 0.25, how would you classify the potential impact of this decision on real GDP? Choose the most appropriate category.
When the government spends money, it creates jobs and income. Other options are incorrect because This answer suggests that only the initial investmen...
If the economy experiences an increase in GDP of $200 billion due to a rise in investment spending, which factor is crucial for calculating the required change in investment spending?
The marginal propensity to save shows how much people save from their income. Other options are incorrect because Some might think total savings matte...
If the marginal propensity to save (MPS) is 0.2, what is the minimum increase in investment spending needed to raise GDP by $200 billion?
When people save 20% of their income, they spend 80%. Other options are incorrect because This answer suggests that we need to invest the same amount ...
Which of the following statements correctly describe the relationship between investment spending and GDP change? Select all that apply.
Investment spending can increase GDP, but none of the statements accurately describe how this happens. Other options are incorrect because This statem...
If an increase in investment spending leads to a rise in real GDP, which of the following is the most likely underlying cause of this relationship?
When businesses invest more, they buy new equipment and hire more workers. Other options are incorrect because Some might think that saving money alon...
To find the minimum change in investment spending necessary to achieve a specified increase in GDP, we must understand the role of the ________, which indicates the proportion of additional income that is saved rather than spent.
The Marginal Propensity to Save shows how much of extra income people save. Other options are incorrect because The APC tells us how much people spend...
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