Question

Put into order the following events.

A. A rise in optimism among consumers and businesses about the future

B. An increase in induced spending

C. The adjustment stops until there is another exogenous change in spending

D. GDP and total spending rise but GDP rises faster until the two are equal

E. A decrease in unplanned spending

F. Total spending is greater than GDP

G. An increase in production and income

H. An increase in autonomous consumer and business spending

Answer 1

1 = A.

A rise in optimism among consumers and businesses about the future

Firstly there is entry of consumers and business in the market, which rises the number of consumers and businesses providing products and services as per the need of the consumers.

2 = H.

An increase in autonomous consumer and business spending

As there will be business providing products and services according to the need of the consumers, there will be an increase in the spending of the consumers.

3 = B.

An increase in induced spending

As the spending of the consumers and businesses would increase, there will be an overall increase in the spending of the market.

4 = F.

Total spending is greater than GDP

Then, the total spending of the market would be more than the GDP of the market.

5 = E.

A decrease in unplanned spending

There will be a considerable decrease in the spending which is not planned by them in the overall market.

6 = G.

An increase in production and income

There will be an increase in the production and income of the overall market.

7 = D.

GDP and total spending rise but GDP rises faster until the two are equal

The GDP will grow faster to match the rise in the GDP until it becomes equal to the rise of the spending.

8 = C.

The adjustment stops until there is another exogenous change in spending.

Finally, the GDP will stop rising when it becomes equal to the total spending until there is an change in the spending due to any other factor.