eco 11 quiz

Firms do not change prices frequently because:

it is costly to do so

When actual investment is less than planned investment:

firms sold more output than expected

In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm:

changes production levels to meet the demand.

Menu costs are the costs of:

changing prices

The largest component of planned aggregate expenditure is:

consumption

The four components of planned aggregate expenditure are:

consumption, planned investment, government purchases, and net exports.

The decision whether to change prices frequently or infrequently is an application of the:

cost-benefit principle

The two parts of the Keynesian consumption function are consumption that depends on ______ and consumption that depends on _____.

disposable income; factors other than disposable income

The basic Keynesian model is built on the key assumption that:

firms meet the demand for their products at preset prices.

When actual investment is greater than planned investment:

firms sold less output than expected

All of the following would be included in planned aggregate expenditure EXCEPT:

interest paid on the government debt

If firms sell more output than expected, planned investment:

is greater than actual investment

If firms sell less output than expected, planned investment:

is less than actual investment

The consumption function is relationship between consumption and:

its determinants, such as disposable income.

In the basic Keynesian model all of the following are true EXCEPT:

planed investment always equals actual investment

Unplanned inventory investment equals zero when

planned investment equals actual investment.

Planned aggregate expenditure is total:

planned spending on final goods and services.

All of the following would be included in planned aggregate expenditure EXCEPT:

social security payments

If firms sell less than expected, actual investment increases because _____, which is counted as investment.

the unsold goods are added to inventory

Planned investment may differ from actual investment because of:

unplanned changes in inventories