If an economy experiences a $0.8 trillion increase in investment resulting in an increase in real GDP from $10 trillion to $12 trillion,
a. what is the change in equilibrium expenditure?
b. what is the change in autonomous expenditure?
c. what is the multiplier?
d. how would an increase in the marginal tax rate effect the multiplier?
a. The change in equilibrium expenditure is $2.0 trillion.
b. The change in autonomous expenditure is $0.8 trillion.
c. The multiplier is 2.5.
d. An increase in the marginal tax rate decreases the size of the multiplier.
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Comment on the following statement: "The output effect and the factor substitution effectwork in opposite directions, so it is possible that a decrease in the wage rate can lead to a decrease in the amount of labor hired."
What will be an ideal response?
Entry into a monopolistic competitive industry
A) is easy. B) is hard. C) requires governmental approval. D) requires collusion.