Exam 11: Expenditure Multipliers: the Keynesian Model

When disposable income increases from $6 trillion to $6.5 trillion, consumption expenditure increase from $5.5 trillion to $5.9 trillion. The MPC equals

What is the relationship between the aggregate expenditure curve and the aggregate demand curve? Explain the relationship. Disposable income (trillions of 2005 dollars) Consumption exp enditure (trillions of 2005 dollars) 0.0 0.8 1.0 1.6 2.0 2.4 3.0 3.2 4.0 4.0

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. What is the unplanned inventory change when GDP is equal to $400?

When aggregate planned expenditure is greater than real GDP, inventories decrease.

ʺSimilar to imports, U.S. exports depend on the level of U.S. real GDP so that if real GDP increases, U.S. exports increase.ʺ Explain whether the previous sentence is correct or incorrect.

-In the above figure, autonomous expenditure along AE₁ equals

The consumption function shows how much

The positive slope of the consumption function indicates that

-In the above figure, at point d firms would find themselves with inventories their target level and so would ____________production.

The multiplier effect is smallest

-The figure shows Tropical Isleʹs aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is than real GDP, firmsʹ inventories , and firms their production.

When autonomous expenditure increases, equilibrium aggregate expenditure

Suppose real GDP increases from $13 trillion to $14 trillion. As a result, consumption expenditure increases from $13 trillion to $13.75 trillion. This result implies the MPS equals

At equilibrium expenditure, unplanned changes in inventory

Which of the following statements is correct?

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

Equilibrium expenditure is defined as the level of aggregate expenditure where

Suppose that the slope of the AE curve is 0.75. Then a $100 decrease in autonomous spending means equilibrium expenditure will

Induced expenditure includes _________.

In an article regarding Bangladeshʹs economy, the author suggests that the government ...ʺ[g]ive double tax breaks on investment dollars. Give a tax break to R&D [research and development]. Give a tax break on donations to educational institutions.ʺ Suppose the multiplier in Bangladesh is 2. If the government enacts the proposed policies and__________ , aggregate expenditure __________in the short run.