Hello, Could anyone confirm these are correct? - Thank you (2) True or False: Th

Question

Hello,

Could anyone confirm these are correct? - Thank you

(2)

True or False: This is an example of the paradox of thift.

@Aplia: Student Question × eHello, Could Anyone Coni D courses aplia.com/af servlet/quiz?quiz action-takeQuiz&quiz;_probGuid-Q4PLC0A8010100000030da8a700a0000&ctx;=asoka2000-0074&ck-3-14677; 58356253 0AAA055801553B576A8C0BD30000 7 : Apps Nothing s Free Dav Ambition vs Disconte California Real Estate Power Real Estate In p a Principles of Account Chess Traps: Bobby F 0 Mark Cuban & Tai Lo How to nvest during O Ten Commandment Current Fund Docume E 7. Paradox of thrift Consider a hypothetical closed economy in which there are no income taxes. If households spend $0.80 of each additional dollar they earn and save the remainder, the expenditure multiplier for this economy is 5.0 The following graph shows the initial aggregate demand (AD) and short-run aggregate supply (SRAS) curves of this economy. Suppose that the economy is currently in a recession and that business firms are pessimistic about the future and do not respond to a fall in interest rates. In addition, all households are pessimistic about job prospects and desire to consume less and save more at all levels of income. As a result personal consumption in this economy decreases by $1 billion The reduction in personal consumption will lead to a decrease in aggregate demand by $5.0 billion at every price level Shift either the AD curve or the SRAS curve, or both, to show the new aggregate demand curve after the full impact of the multiplier process of the reduction in personal consumption has taken place 100 90 SRA AD 80 70 60 SRAS 50 0 AD1 Session Timeout 59:39 I'm Cortana. Ask me anything 3:39 PM 7/5/2016

Explanation / Answer

All the answers are correc and it's true for the last answer as Paradox of thrift states that individuals try to save more during an economic recession, which essentially leads to a fall in aggregate demand and hence in economic growth.

If you don't understand anything then comment, I'ill revert back on the same. :)

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