Define induced expenditure and autonomous expenditure. Which expenditure items are induced expenditure and which are autonomous expenditure?
What will be an ideal response?
Induced expenditure is aggregate expenditure that changes as real GDP changes. Consumption expenditure and imports respond to changes in real GDP, so they have induced components. Autonomous expenditure is aggregate expenditure that does not change as real GDP changes. Investment, government expenditure, and exports are autonomous expenditure. Consumption expenditure also has an autonomous component.
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Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S. basket costs $200,
and the dollar/euro exchange rate is $1.20 per euro, then the price of the European basket in terms of U.S. basket is:
The marginal productivity theory of distribution has been criticized because
a. it assumes that the existing distribution of ownership factors is fair and just when it may not be. b. it does not tell us much about real policy matters. c. a factor's MRP does not in any way correspond to productive effort. d. All of the above are correct.