Exam 10: Income and Expenditures Equilibrium

If the spending multiplier equals 6 and equilibrium real GDP is $32 billion below potential real GDP, then total planned expenditures need to decrease by approximately $5.33 billion to close the recessionary gap.

Leakages are greater than injections when total planned expenditures exceed real GDP.

A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-economy spending multiplier of 3.33.

The interest rate effect states that an increase in the price level will cause:

The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years. Table 10.3 Equilibrium Real GDP C I Exports Imports Year 1 \ 9,350 \ 7,500 \ 1,350 \ 1,800 - Year 2 \ 11,450 \ 8,900 - \ 2,350 \ 1,600 Assume that government spending is zero for this economy. -Consider Table 10.3 to calculate the value of the MPC.

In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade.

The figure given below represents the leakages and injections of an economy. Figure 10.6 -In Figure 10.6, if 0L is the potential level of real GDP, then KL represents:

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 is the equilibrium level of imports in year 2?

If a country's imports are very important in determining the volume of exports from its trading partners, then:

If MPS is equal to 0.15 and MPI is equal to 0.10, an initial change in expenditures of $19,000 would result in a total change in income equal to _____.

At each round of the multiplier process, increases in income:

At the equilibrium level of income, which of the following is true?

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 -In Figure 10.7, the spending multiplier equals _____.

The aggregate demand curve shows:

Ceteris paribus, a decline in the general price level in the United States will make foreign-produced goods relatively more expensive to U.S. residents and increase the aggregate demand of domestic goods.

If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____.

If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise.

Assume we are at an income level where the C+I+G+X (consumption+investment+government spending+net exports) function lies above the 45-degree line. We can conclude that at this income level:

Scenario 10.2 A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. -Refer to Scenario 10.2. What is the spending multiplier of this economy?

The percentage of a change in income that is spent domestically is: