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ECS1601 ASSIGNEMNT 5 SEMESTER 2024 When government spending is increased, the aggregate spending curve_______. a. swivels down b. shifts downward c. shifts upward d. swivels upward$2.85
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ECS1601 ASSIGNEMNT 5 SEMESTER 2024 When government spending is increased, the aggregate spending curve_______. a. swivels down b. shifts downward c. shifts upward d. swivels upward
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Course
Economics IB (ECS1601)
Institution
University Of South Africa (Unisa)
ECS1601 ASSIGNEMNT 5 SEMESTER 2024
When government spending is increased, the aggregate spending curve_______.
a. swivels down
b. shifts downward
c. shifts upward
d. swivels upward
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Education is the most powerful weapon which you can use to change the world
Started on Wednesday, 18 September 2024, 7:59 AM
State Finished
Completed on Wednesday, 18 September 2024, 8:47 AM
Time taken 47 mins 42 secs
Marks 20.00/20.00
Grade 100.00 out of 100.00
Question 1
Correct
Mark 1.00 out of 1.00
When government spending is increased, the aggregate spending curve_______.
a. swivels down
b. shifts downward
c. shifts upward
d. swivels upward
A change in government spending causes a shift of the aggregate spending curve either upwards or downwards. When
government spending is increased, the aggregate spending curve shifts upwards and as a result, aggregate expenditure
increases. Please see page 141 in the prescribed book. A swivel of the aggregate spending curve either up or down is caused
by a change in the tax rate.
When the tax rate decreases, the size of the multiplier___________. As a result, the equilibrium level of income
will_____________.
a. decreases; increase
b. increases; remain unchanged
c. decreases; decrease
d. increases; increase
Your answer is correct.
When the tax rate is added, it reduces the consumption function, the size of the multiplier decreases, and as a result, the
equilibrium level of income also decreases. When the tax rate decreases, the disposable income increases, and the size of
the multiplier also increases. As a result, the equilibrium level of income increases.
Question 3
Correct
Mark 1.00 out of 1.00
Which of the following statements is correct about an open economy?
a. The introduction of a foreign sector in the economy will cause the size of the multiplier to increase.
b. When foreign goods bought in China exceed goods produced and sold to other foreign countries, it implies that
imports exceed exports and result in a deficit in the trade balance.
c. The slope of the consumption function will become larger.
d. The equilibrium level of income will be higher.
Goods bought in China represent imports. Since money is flowing out of the economy, this constitutes a leakage. While
goods produced and sold to other foreign countries represent exports. Since money is flowing into the domestic country, this
constitutes an injection. Imports will exceed exports and there will be a deficit in the trade balance. Please see page 7 for the
discussion of leakages and injections. Firstly, When the foreign sector is introduced, the slope of the consumption function is
reduced further. As a result, the multiplier becomes even smaller. Please see example on page 156 of the prescribed book.
Secondly, due to the multiplier being small as a result of the addition of marginal propensity to import to the slope of the
consumption function, the equilibrium level of income will be lower than before the introduction of the foreign sector.
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