In the simple Keynesian model, why does actual investment spending have to equal saving in the absence of the government and foreign sectors? Is this true only for the equilibrium? Explain
What will be an ideal response?
Real Gross Domestic Product (GDP) equals actual investment spending plus consumption spending, and real Gross Domestic Product (GDP) equals consumption spending plus saving. Therefore, actual investment spending and saving are always equal. However, planned investment spending and saving are not always equal. When they are not equal, unplanned changes in inventories make actual investment spending and saving equal. In equilibrium, planned investment and saving are equal.
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It is conventional to divide the nation's total production into four categories. Name and explain the four categories. In the United States, which category accounts for the largest share and the smallest share of the nation's total production?
What will be an ideal response?
Refer to Figure 7.1. Suppose that instead of $350, Angus earns only $250 by playing the bagpipes, but all other earnings remain the same
Also, suppose the city passes an ordinance banning loud music, and this directly impacts Angus's legal ability to play his bagpipes. In this case, the Coase theorem predicts that A) Dudley will pay Angus to not play the bagpipes. B) Angus will pay Dudley so Angus can play the bagpipes. C) Dudley will do nothing and Angus will mop floors. D) no bargain can be reached between Angus and Dudley.