What is the difference between induced and autonomous expenditure? Which components of aggregate expenditure fall under which category?
What will be an ideal response?
Induced expenditure is expenditure that depends on the level of real GDP, so that when real GDP changes, induced expenditure changes. Autonomous expenditure is independent of the level of real GDP, so that when real GDP changes, autonomous expenditure does not change. Consumption expenditure includes elements of both autonomous and induced expenditure. So, too, do imports. However, investment, government expenditure on goods and services, and exports are all autonomous expenditure.
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If the opportunity cost of working outside the home decreases then it is likely that ________, assuming all else equal
A) there will be a rightward shift in the labor supply curve B) there will be an upward movement along the labor supply curve C) there will be a downward movement along the labor supply curve D) there will be a leftward shift in the labor supply curve
Research supporting the new Keynesian model finds that prices are ________
A) slow to adjust to aggregate demand shocks B) changed very frequently C) changed only infrequently D) not as flexible as wages