Question 25(1 point)

Which of the following statements is true?

a

T = Net Taxes= Transfers - Taxes

b

Consumption-Income Line (CIL): C = (a - b x T) + b x Y

c

An increase in autonomous consumption shifts both the consumption curve and the CIL upwards.

d

All of the above.

e

Only b) and c)

Question 26(1 point)

Which of the following statements is true?

a

In a closed economy with no government, AE = C + Ig.

b

Total Investment (I) = Planned Investment (Ig) + Changes in Inventories. Planned Investment (Ig) is assumed to be independent of income. Changes in inventories are assumed to be unplanned and dependent on the level of income; therefore,theycan be negative, positive or zero.

c

Equilibrium GDPis the level of output whose production will create total spending just sufficient to purchase that output. In equilibrium, changes in inventories are zero.

d

All of the above.

e

Only a) and b)

Question 27(1 point)

Which of the following statements is true? (Remember, Y=Income=Real GDP)

a

When AE < Y, firms will adjust to theexcess demand(revealed by the declining inventories) by stepping up production.

b

When AE > Y, firms are accumulating unplanned inventory investment, and will respond to thisexcess supply

by cutting back on production.

c

In a closed economy, savings and planned investment are equal at equilibrium.

d

All of the above.

e

Only a) and b)