Suppose that business executives are very optimistic, and they raise their investment spending. What happens to the expenditure line? How will this affect real GDP?ResponsesThe expenditure line shifts up, and real GDP increases by more than the amount of the shift.The expenditure line shifts up, and real GDP increases by more than the amount of the shift.The expenditure line shifts up, and real GDP decreases. The expenditure line shifts up, and real GDP decreases. The expenditure line shifts down, and real GDP decreases by more than the amount of the shift. The expenditure line shifts down, and real GDP decreases by more than the amount of the shift. The expenditure line shifts down, and real GDP increases.The expenditure line shifts down, and real GDP increases.
Question
Suppose that business executives are very optimistic, and they raise their investment spending. What happens to the expenditure line? How will this affect real GDP?ResponsesThe expenditure line shifts up, and real GDP increases by more than the amount of the shift.The expenditure line shifts up, and real GDP increases by more than the amount of the shift.The expenditure line shifts up, and real GDP decreases. The expenditure line shifts up, and real GDP decreases. The expenditure line shifts down, and real GDP decreases by more than the amount of the shift. The expenditure line shifts down, and real GDP decreases by more than the amount of the shift. The expenditure line shifts down, and real GDP increases.The expenditure line shifts down, and real GDP increases.
Solution
The correct response is: "The expenditure line shifts up, and real GDP increases by more than the amount of the shift."
Here's why:
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When business executives are optimistic, they tend to invest more in their businesses. This could mean anything from expanding their operations, hiring more employees, or investing in new technology.
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This increase in investment spending causes the expenditure line (which represents total spending in the economy) to shift upwards. This is because more money is being spent in the economy.
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As a result of this increased spending, the real GDP (Gross Domestic Product) also
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