Exam 11: Expenditure Multipliers: They Keynesian Model

In an article regarding Bangladesh's economy, the author suggests that the government ..."[g]ive do tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax b on donations to educational institutions. " HYPERLINK "http://www.groundreport.com/" www.groundreport.com, March 24, 20 Suppose the multiplier in Bangladesh is 2. If the government enacts the proposed policies and _ aggregate expenditure in the short run.

Equilibrium expenditure occurs where

If aggregate planned expenditures are less than the level of real GDP,

A movement along the consumption function to higher levels of consumption expenditure arises because

In the very short term, planned investment _ when GDP changes and planned consumption expenditure _ when GDP changes.

-Using the data in above table, the marginal propensity to consume is

If wealth increases, the consumption function shifts upward.

-In the above table, there are no taxes and no imports or exports. If current real GDP is equal to $7,000, then firms will

Suppose that the slope of the AE curve is 0.67. Then a $100 decrease in autonomous spending causes equilibrium expenditure to

In the short run, an upward shift in the aggregate expenditure curve leads to a leftward shift in the short- run aggregate supply curve.

The slope of the aggregate expenditure curve is

The marginal propensity to consume equals

If aggregate planned expenditures are less than real GDP then

If the price level rises, the purchasing power of real wealth

Which of the following statements is correct?

Explain why the multiplier is greater than 1.

The multiplier measures the

If there are no income taxes or imports, the multiplier equals

Explain the basic idea of the expenditure multiplier and the role consumers play in determining its magnitude.

The difference between planned and unplanned spending is .