Exam 11: B: The Aggregate Expenditures Model

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. The equation representing the investment schedule for the above economy is:

Refer to the diagram below.The multiplier in this economy is:

Refer to the above information.In this economy a 3 percentage point decrease in the interest rate will:

If at some level of GDP the economy is experiencing an unplanned decrease in inventories:

Unplanned changes in inventories:

The following information is for a closed economy: Refer to the above information.If in addition to spending $80 billion at each level of GDP, government imposes a lump-sum tax of $100:

A "recessionary expenditure gap" is:

A recessionary expenditure gap in a mixed open economy can be measured as the extent to which aggregate expenditures fall short of those required to achieve the full-employment GDP.

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars. Refer to the above table.For the open economy the equilibrium GDP and the multiplier will be:

The equilibrium level of GDP in the above open economy:

Refer to the above diagram which is for a private closed economy.All figures are in billions of dollars.If businesses were willing to invest $30 at each possible level of GDP, the equilibrium level of GDP would be:

In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving.

Refer to the diagram below for a private closed economy.The multiplier is:

If government expenditures increase by $20 billion and equilibrium GDP increases by $50 billion as a result, we can conclude that:

Exports are added to, and imports are subtracted from, aggregate expenditures in moving from a closed to an open economy.

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

Refer to the above diagram which applies to a private closed economy.If gross investment increases from I_g1 to I_g2, the equilibrium GDP will:

The recessionary expenditure gap is the amount by which the equilibrium GDP and the full-employment GDP differ.

The equilibrium level of GDP in a private closed economy is where: