Exam 25: Demand-Side Equilibrium: Unemployment or Inflation

Because of a recession in Japan, net exports from the United States decrease by $10 billion. If the MPC is 0.75, how much less spending will occur in the U.S. economy in the second "round" of spending?

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

Figure 9-5 In Figure 9-5, if the second round effect of an increase in autonomous spending of $100,000 is $75,000, then the multiplier is

When the price level falls,

A recessionary gap exists when the equilibrium level of GDP exceeds potential GDP.

Suppose the economy operates at potential output, if the amount that businesses plan to invest is greater than the amount that consumers plan to save, then

Suppose the economy is suffering in a recessionary period. Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead. What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?

If the expenditure schedule must be shifted downward to reach potential GDP, then the economy is experiencing a(n)

Injections to the circular flow model include saving, taxes, exports, and investment.

When GDP decreases, consumption spending increases.

The expenditure schedule includes the consumption function.

Figure 9-1 In Figure 9-1, at $7,000 billion real GDP,

The inflationary gap is the

A given income-expenditure diagram always assumes a variable price level.

The slope of the aggregate demand curve illustrates that as the price level rises,

The amount by which equilibrium real GDP exceeds full-employment GDP is known as

In a simplified circular flow model with no government, in equilibrium, S = I + (X − IM).

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

If total spending is less than the value of total output, firms

A higher price level leads to