ECS1601 Assessment 3 Attempt 2 Plus Explanations
With the given information, answer the question.
Autonomous consumption R 250 billion
Autonomous government expenditure ...
answer the question autonomous consumption r 250 billio
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University of South Africa (Unisa)
Economics Ecs1601
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2023
ASSESSMENT
02
THREE
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1
,With the given information, answer the question.
Autonomous consumption R 250 billion
Autonomous government expenditure R 100 billion
Autonomous investment R 250 billion
Autonomous exports R 350 billion
Autonomous imports R 250 billion
Marginal propensity to consume 0.8
What is autonomous aggregate spending?
Autonomous aggregate spending refers to the total amount of spending in an economy
that is not influenced by changes in income. It includes autonomous consumption,
autonomous government expenditure, and autonomous investment, as well as autonomous
exports minus autonomous imports.
Adding up the values given, we get:
Autonomous aggregate spending = Autonomous consumption + Autonomous government
expenditure + Autonomous investment + Autonomous exports - Autonomous imports
= R 250 billion + R 100 billion + R 250 billion + R 350 billion - R 250 billion
= R 700 billion
Therefore, the autonomous aggregate spending in this economy is R 700 billion.
EXPLANATION
Which of the following statements about the investment decision is correct?
a.
For an investment to be profitable, the interest rate on a loan has to exceed the
expected return on new machinery for a firm.
b.
Changes in the interest rate affect the decision to buy capital goods and financial
assets.
c.
When an expansionary monetary policy is applied, the opportunity cost of buying
capital goods is higher than that of buying financial assets.
, d.
Acquiring new machinery and equipment for a firm is a low-risk investment because
the interest rate is the only factor to consider when buying these capital goods.
Option b is the correct statement: Changes in the interest rate affect the decision
to buy capital goods and financial assets.
The investment decision involves comparing the expected return from investing in a
project with the cost of financing the investment. The interest rate is a key
factor in this decision, as it represents the cost of borrowing funds to finance
the investment.
Changes in the interest rate can affect the attractiveness of investing in both
capital goods (such as machinery and equipment) and financial assets (such as
stocks and bonds). When interest rates are high, it becomes more expensive to
borrow funds to finance an investment, which can discourage investment in both
types of assets. Conversely, when interest rates are low, borrowing costs are
lower, making investment more attractive.
Option a is incorrect because profitability of an investment
EXPLANATION
Which of the following statements about the investment decision is correct?
a.
For an investment to be profitable, the interest rate on a loan has to exceed the
expected return on new machinery for a firm.
b.
Changes in the interest rate affect the decision to buy capital goods and financial
assets.
c.
When an expansionary monetary policy is applied, the opportunity cost of buying
capital goods is higher than that of buying financial assets.
d.
Acquiring new machinery and equipment for a firm is a low-risk investment because
the interest rate is the only factor to consider when buying these capital goods.
Option b is the correct statement: Changes in the interest rate affect the decision
to buy capital goods and financial assets.
The investment decision involves comparing the expected return from investing in a
project with the cost of financing the investment. The interest rate is a key
factor in this decision, as it represents the cost of borrowing funds to finance
the investment.
Changes in the interest rate can affect the attractiveness of investing in both
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