after point ‘E’ in Fig.

Many have filed for bankruptcy, with an ... Identifying Speculative Bubbles and Its Effect on Markets Speculation plays an interesting role in economics and one that drastically affects markets. Planned savings is always = to the planned investment.

f) No, that's not right.

A reduction in government expenditure will affect aggregate demand. This is because a ... Externalities Question 1 A steel manufacturer is located close to a large town. Plagiarism Prevention 4.

3. To bring the inventory back to the desired level, firms would plan to increase the production till saving and investment become equal to each other. c) Yes, that's correct.

According to this approach, the equilibrium level of income is determined at a level, when planned saving (S) is equal to planned investment (I). Equilibrium level of national income - self-test questions ; National income equilibrium - short answer ; Economic growth - self-test questions ; Section 3.3 Macroeconomic models - simulations and activities ; Section 3.4 Demand-side and supply-side policies - notes ; Section 3.4 Demand-side and supply-side policies - questions It is not the full employment level since employment increases even after the equilibrium level. When planned spending (AD) is more than planned output (AS), then (C + I) curve lies above the 45° line.

c) Yes, that's correct.

If the rate of VAT is increased this will reduce aggregate demand and shift the curve to the left.

To clear the unwanted increase in inventory, firms would plan to reduce the production till saving and investment become equal to each other. It is assumed to be independent of the level of income, i.e. Relaxing lending controls will boost aggregate demand and shift the curve to the right.

If planned saving is less than planned investment, i.e. A reduction in income tax will boost aggregate demand and shift the curve to the right.

It means that consumers and firms together would be buying less goods than firms are willing to produce. 1. a) No, that's not right.

Only point E can be at equilibrium, where output, or national income and aggregate expenditure, are equal. Image Guidelines 5. An increase in interest rates will reduce aggregate demand and shift the curve to the left. a) Yes, that's correct. If output was below the equilibrium level at L, then aggregate expenditure would be greater than output. AS curve is represented by the (C + S) curve. (iii) Price level is assumed to remain constant.

According to the Keynesian theory, the equilibrium level of income in an economy is determined when aggregate demand, represented by C + I curve is equal to the total output (Aggregate Supply or AS).

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