Exam 11: Expenditure Multipliers

In the very short run, the components of aggregate planned expenditure that depend on the level of real GDP are

In the third quarter of 2008, investment in the U.S. totaled $1.4 trillion and in 2007, investment was $1.3 trillion. The change in investment

"The global financial crisis has had a considerable impact on China's export growth, which will continue to show weakness with recession in the U.S. and Europe," said a report by JP Morgan & Co. www.money.cnn.com, 11/11/2008 If Chinese exports continue to decline, the AE curve will shift ________, the price level will ________ in the long run and real GDP will ________ in the long run.

Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.

A movement along the consumption function is the result of changes in

The sum of the components of aggregate expenditure that are not influenced by real GDP is called

-In the above figure, at a disposable income level of $2 trillion, saving equals

A change in which of the following changes the slope of the aggregate expenditure curve?

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 "... factories have been exposed to ... 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 The story describes

The multiplier is greater than 1 because

The slope of the saving function is equal to

In an article regarding Bangladesh's economy, the author suggests that the government ..."[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." www.groundreport.com, March 24, 2008 The increase in investment is considered ________ and will generate a larger increase in ________.

The aggregate expenditure curve shows

Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $17 trillion, then inventories are ________ their target levels and real GDP will ________.

A movement along the saving function occurs when

The relationship between net exports and GDP makes the slope of the aggregate expenditure curve

The relationship between the multiplier and the MPC is

If the change in autonomous investment equals $1 trillion and the change in real GDP equals $4 trillion, the multiplier equals 1/4.

In an article regarding Bangladesh's economy, the author suggests that the government ..."[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." www.groundreport.com, March 24, 2008 Suppose the multiplier in Bangladesh is 2. As a result of enacting the proposed policies, which of the following describe possible outcomes in the short run? I. an $20 billion increase in investment will increase aggregate expenditure by $40 billion. II. the AE curve will shift upward. III. there will be an unplanned increase in inventories.

The slope of the aggregate expenditure curve equals the change in