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2 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2016 · Paper 2 · Question 1(a)(i)

Question 1 covers macroeconomics models, investment, and inventory adjustments.

Define the term 'equilibrium level of output'.

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Other parts of this question

  1. 1(a)(ii)Outline TWO factors that could account for the volatility of investment spending.[4 marks]
  2. 1(b)Differentiate between the 'investment curve' and the 'investment demand curve' for an economy.[4 marks]
  3. 1(c)(i)Explain why the information in Table 1 essentially describes an investment demand curve.[3 marks]
  4. 1(c)(ii)Using the information in Table 1, graph the investment demand curve.[4 marks]
  5. 1(d)Discuss TWO ways in which businesses adjust their level of inventory investment if the level of GDP is in disequilibrium.[8 marks]

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