Exam 11: The Income-Expenditure Model

An increase in the price level will:

An increase in the marginal propensity to consume will tend to cause:

If the marginal propensity to consume is 0.75 and marginal propensity to import is 0.15, then an increase in government spending by 200 will increase GDP by:

The balanced- budget multiplier equals 1.

If a economy's planned expenditures turn out to be less than production, then inventories will be:

Figure 11.3 -Refer to Figure 11.3 to answer the following questions. Suppose the economy is initially at point d. A decrease in consumer confidence will move the economy back to equilibrium at point:

During recessions, government spending usually:

Briefly explain what a steeper consumption function implies.

-Refer to Table 11.5. If both G and T increase by 100, equilibrium output will:

When the consumption function is expressed as C = 200 + .75(1- t)y where t =0.2, then if income is 1000, then total consumption is:

Which of the following statements is true?

If consumption is $25,000 when income is $26,000, and consumption increases to $25,900 when income increases to $28,000, the marginal propensity to consume is:

The marginal propensity to consume is:

If the marginal propensity to consume is 0.8 and marginal propensity to import is 0.3, then an increase in exports by 100 will cause equilibrium GDP to increase by

In a closed economy with no government, derive the formula for the equilibrium output.

In an open economy, the marginal propensity to import is added to the denominator of the multiplier formula.

If the consumption function is C = 100 + 0.9Y, then the multiplier is:

An increase in government spending will:

An increase in the price level will result in a:

-Refer to Table 11.3 At an aggregate output level of $2,000 million, what will change in order to bring the economy to equilibrium?