Exam 11: Expenditure Multipliers

If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level ________ and real GDP ________ $3 million.

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

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton. a) Find aggregate planned expenditure for each level of real GDP. b) What is the equilibrium level of real GDP?

At a level of disposable income of $0, consumption expenditure is $3,500. Therefore when disposable income is $0

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million and prices are fixed, equilibrium GDP would

Actual aggregate expenditure does not always equal real GDP.

-In the above figure, induced expenditure is equal to $2 trillion at point

The size of the marginal propensity to consume

-Based on the figure above, the marginal propensity to consume is

Induced expenditure includes

List the components of aggregate expenditure and describe how each of them change as real GDP increases.

The multiplier is the amount by which ________ is multiplied to determine ________.

What does the marginal propensity to consume measure and how is it related to the consumption function?

The Keynesian model of aggregate expenditure assumes that

The MPC is the fraction of

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that ..."its clothing factories have been exposed to frontal competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..." www.ft.com, 3/13/2006 Suppose real GDP is $14 billion, exports total $2 billion and the multiplier is 4. If exports decline by $600,000,000, real GDP in Mauritius will

-In the above figure, if real GDP is greater than $15 trillion, inventories will be

-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 marginal propensity to consume?