Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

Where does equilibrium occur in an income expenditure diagram? What would be the effect if production is at either on the left or right side of the equilibrium point?

Businesses in the United States cut their investment projects by $30 billion.If the MPC is 2, what will be the impact on the national income (Y)?

Differentiate between an induced increase in consumption and an autonomous increase in consumption.How are they represented on a graph?

If the government increases defense spending by $1 billion and the MPC is 0.8, how much additional spending will occur in the third "round" of spending?

Using the standard 45° line diagram, how does a decrease in investment spending effect the expenditure schedule?

45° line diagrams show how

The basic reason for the multiplier effect is that when you spend money,

In the 2007-2009 period, the expenditure level in the United States intersected the 45° line below potential GDP, causing

If investment spending depends on GDP, this is called induced investment.

When income rises, total expenditures remain constant.

Using the saving-investment approach, which of the following describes an equilibrium condition of GDP?

As the multiplier process works through time, the size of the multiplier effect becomes

The main examples of macroeconomic coordination failures are

Assume that the MPC is 0.80 and investment rises by $50 million.How much additional saving will this generate in the second round of spending?

If the price level rises, the effect on the expenditure schedule and equilibrium real GDP is to

An expenditure schedule shows the relationship between GDP and total output.

When equilibrium GDP falls below potential GDP, an inflationary gap exists.

If the multiplier is 4 and real GDP increases by $520 billion, the increase in investment spending must have been

To avoid a coordination failure, the intentions of savers and investors must be both

Figure 9-5 ​ -If the shift in the C + I + (X − IM) in Figure 9-5 was caused by a 80 dollar increase in investment, then the multiplier is