Exam 11: Expenditure Multipliers: the Keynesian Model

Real GDP C I G X M 100 75 25 95 10 1 200 150 25 95 10 2 300 225 25 95 10 3 400 300 25 95 10 4 500 375 25 95 10 5 600 450 25 95 10 6 700 525 25 95 10 7 800 600 25 95 10 8 900 675 25 95 10 9 1000 750 25 95 10 10 -In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. If investment increased by $26 to $51 then equilibrium expenditure will

The expenditure multiplier equals

The Keynesian model of aggregate expenditure describes the economy in

If an increase in a householdʹs disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

The multiplier is greater than 1 because the change in autonomous expenditure leads to __________.

Real GDP (dollars) Consumption expenditure (dollars) Investment (dollars) Government expenditure (dollars) 3,000 2,500 500 500 4,000 3,250 500 500 5,000 4,000 500 500 6,000 4,750 500 500 7,000 5,500 500 500 8,000 6,250 500 500 -In the above table, there are no taxes so that that real GDP equals disposable income) and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is

If there are no income taxes or imports, the multiplier equals 1/1 - marginal propensity to consume).

The MPC and MPS measure changes in consumption expenditure and saving that result from changes in

-The figure above illustrates an economyʹs consumption function. What is the marginal propensity to save in this economy?

There is a movement along the consumption function if there is ___________.

Suppose the MPC = 0.90 and there are no taxes or imports. What dos the multiplier equal? If the initial equilibrium aggregate expenditure is $12 trillion, what will be the effect on aggregate expenditure of a $100 billion increase in investment?

-In the above figure, autonomous expenditure is

An increase in U.S. exports because of increasing foreign incomes is _________in the United States.

Disposable income (dollars) Consumption exp enditure (dollars) 100 225 200 300 300 375 400 450 500 525 600 600 -Using the data from the above table, the marginal propensity to save is

If the slope of the saving function is 0.27, then the marginal propensity to _________.

The size of the marginal propensity to save

Discuss the link between real GDP and imports.

The marginal propensity to consume measures

-In the above figure, if real GDP equals $12 trillion, there would be

___________consumption expenditure is greater than disposable income.