İKTİSADA GİRİŞ II

Production will decrease if planned expenditures are less than the value of current production

Savings create a leakage in income-expenditure flow

Investments create an injection in income-expenditure flow

4 is the value of the expenditure multiplier when the marginal propensity to save (MPS) is 0.20 and the marginal propensity to import (MPI) is 0.05

5 is the value of the multiplier when the marginal propensity to consume (MPC) is 0,80

Inflationary gap arises in case of overemployment of production factors in the economy

There may be some economic events that cause the failure of Say’s Law. For example, if the production factors want to save money rather than spend a portion of their income, then the all return from productions of the firms will not be expended. Therefore, the quantity demanded for goods and services will be lower than the quantity produced. In case of production or supply surplus, firms will decrease their production and start to lay their workers. This means that the economy diverges from the level of full employment. The. correct answer is E.

According to Keynes, equilibrium income can be achieved at the level of underemployment or overemployment. What is important here is the level of aggregate demand. Since it is difficult to change the production capacity that determines aggregate supply in the short term, the level of income depends on aggregate demand or aggregate expenditures. The correct answer is E.

Full employment level of income is the level of income that will be attained in the economy if all the factors of production participate most effectively into the production. This level of income is called potential GDP The correct answer is D.

Equilibrium level of income in the economy means that aggregate supply and aggregate demand are equal to each other. The correct answer is D.

Underemployment Equilibrium Level is the level of equilibrium income in which some of the production factors are idle. The correct answer is C.

Leakages are used to denote reductions in autonomous components of aggregate expenditures. It is possible to mention three types of leakages from the income-expenditure flow: savings, taxes and imports for an open economy. Let’s shortly review these concepts. The correct answer is E.

Saving Paradox is the reduction in the consumption expenditures and, therefore, income because of rising savings.

When the households decide to increase their savings without a change in income level, interesting contradiction called as saving paradox will arise. The correct answer is B.

Inflationary Gap is the excess of expenditures when the economy is in equilibrium above the full employment level of income. The correct answer is E.

Deflationary Gap Is the expenditure gap when the economy is in equilibrium below the full employment level of income. The correct answer is A.