Date: 1. Which of the following did classical economists believe would happen if

Question

Date: 1. Which of the following did classical economists believe would happen if the economy experienced a downturn? A) Prices would rise. B) Interest rates would rise. C) The economy would self-correct. D) The government would fix the inefficiencies. 2. If there is no government and no foreign sector in the economy A) personal income and disposable personal income are unequal. B) international trade is an important component of total spending. C) gross domestic product equals consumption plus investment. D) budget and trade deficits are important parts of the model of the economy 3. Suppose economists observe that an increase in government purchases of $10 billicn raises aggregate expenditures by $30 billion. These economists would estimate that the marginal propensity to save is: A) 0.67. B) 0.33. C) 0.5. D) 20 9

Explanation / Answer

1. The before closing balance in retained earnings is zero. The revenue and expense are recorded in their respective account and only when the closing process is completed we transfer to retained earnings account.

2. The after closing balance of retained earnings account is 9000 (30000-18000-3000)

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