Exam 10: Income and Expenditures Equilibrium

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 -Given a potential GDP level of $3,000, the recessionary gap in Figure 10.7 equals _____.

The Keynesian region of the aggregate supply curve is:

If German imports of French products are very important in determining the volume of German exports to France, we would expect the actual German spending multiplier to be larger than 1/(marginal propensity to save + marginal propensity to import).

The figure given below represents the leakages and injections in an economy. Figure 10.2 In the figure: I, I1: Investment; G: Government spending; EX, EX1: Exports; T: Taxes; and M: Imports. -Refer to Figure 10.2. When total injections equal $20, the equilibrium level of real GDP is:

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure: S₁ and S₂: Saving functions I: Investment G: Government spending EX: Net exports -In Figure 10.3, which of the following represents the paradox of thrift?

If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium.

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5. Figure 10.5 -Refer to Figure 10.5. Assume that there is a recessionary gap that can be closed by a $500 increase in planned aggregate expenditures. If the economy is initially in equilibrium with a real GDP level of $900, then the target or potential level of real GDP must be:

Scenario 10.1 Imagine an economy that does not have international trade and is originally in equilibrium. Then the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. -What is the marginal propensity to consume for the economy described in Scenario 10.1?

The Keynesian aggregate expenditures model assumes that:

The recessionary gap is given by the difference between potential GDP and real GDP.

The Keynesian aggregate expenditures model assumes that price level is constant.

What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3?

The table given below states the value of the GDP and the different components of aggregate expenditure for two years. Table 10.1 GDP Export Import Year 1 - \ 750 \ 110 \ 60 \ 70 \ 50 Year 2 \ 1,150 \ 930 \ 90 \ 75 \ 125 - -Refer to Table 10.1. What would be the new equilibrium level of real GDP in year 2 if net exports equaled zero?

The figure given below represents the leakages and injections of an economy. Figure 10.6 -In Figure 10.6, the economy is in equilibrium at point _____.

Wealth is considered to be a nonincome determinant of consumption.

If the MPS equals 0.25 and the MPI is 0.15, then an initial change in investment spending of $250 million will result in a total change in equilibrium real GDP of $625 million.

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S), investment (I), export (X), and import (M) of an open economy. Table 10.2 \ 935 -\ 250 \ 320 \ 40 \ 170 \ 100 \ 2,100 \ 0 \ 320 \ 140 \ 170 \ 130 \ 3,320 \ 250 \ 320 \ 200 \ 200 \ 350 \ 4,800 \ 375 \ 320 \ 240 \ 230 \ 415 \ 5,230 \ 650 \ 320 \ 320 \ 250 \ 590 \ 6,300 \ 825 \ 320 \ 340 \ 270 \ 610 Taxes equal zero -Consider the economy described in Table 10.2. Calculate the level of consumption spending when the economy is in equilibrium.

When the purchasing power of money declines:

If an economy consumes 75 percent of any increase in real GDP and spends 10 percent of this increased income on imports, then a decline in government spending by $60 million will result in a total reduction in equilibrium income of:

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5. Figure 10.5 -Refer to Figure 10.5. Suppose that instead of there being a recessionary gap, the economy is characterized by an equilibrium real GDP level of $900 that exceeds the natural unemployment or potential real GDP level by $600. This so-called expansionary gap can be closed by: