How are changes in opportunity cost predicted to affect behavior?
A) The lower the opportunity cost of doing X, the less likely X will be done.
B) The higher the opportunity cost of doing X, the less likely X will be done.
C) The lower the opportunity cost of doing X, the more likely X will be done.
D) a and c
E) b and c
E
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Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $23 million, what unplanned changes in inventories occurred?
A) There was an unplanned decrease in inventories equal to $2 million. B) There was an unplanned decrease in inventories equal to $19 million. C) There was an unplanned increase in inventories equal to $2 million. D) There was no unplanned change in inventories.
The function that shows the inverse relationship between planned consumption and investment spending and the real interest rate, all else constant, is called the:
A) interest-related expenditure function. B) aggregate expenditure function. C) consumption function. D) investment function.