Exam 9: Aggregate Expenditure and Output in the Short Run

Refer to Figure 9.4 for the following question. Figure 9.4 -In Figure 9.4, assume that potential GDP equals $100 billion. The economy is currently producing GDP₁ which is equal to $90 billion. If the MPC is 0.8, then how much must spending change for the economy to move to potential GDP?

Using the following table, compute aggregate expenditure and identify the macroeconomic equilibrium. The numbers in the table are in billions of dollars. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Why do economists care about aggregate expenditure? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The larger the marginal propensity to save, the smaller the multiplier is.

Given the following table, fill in the values of the marginal propensity to save (MPS)and the marginal propensity to consume (MPC). Show that the MPC + MPS = 1. The numbers in the table are in billions of dollars. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?

If inflation in Australia is lower than inflation in other countries, what will be the effect on net exports for Australia, ceteris paribus?

'Investment spending' does not include:

Which is the largest component of aggregate expenditure in Australia?

A decrease in the price level ________ real wealth, which causes consumption to ________.

Which of the following leads to an increase in real GDP?

On the 45° line diagram, the 45° line shows points such that:

Improvements in inventory control help to reduce fluctuations in real GDP.

What is the difference between 'aggregate expenditure' and 'aggregate demand'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Refer to Figure 9.3 for the following questions. Figure 9.3 -Suppose that in Figure 9.3, government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP₁ to GDP₂, and this amount is $400 billion. If the MPC is 0.75, then what is the distance between N and L or by how much did government spending change?

The resulting economic contractions and recessions in many countries during 2008 and 2009 following the global financial crisis affected the sales of personal computer manufacturers such as Dell, whose fiscal first-quarter profit fell 63% in 2009. Decreases in consumer purchases of computers would be counted as a decline in ________, and decreases in business purchases of computers would be counted as a decline in ________.

Which of the following is not a component of aggregate expenditure?

For all points above the 45° line, planned aggregate expenditure will be less than real GDP.

Macroeconomic equilibrium occurs when:

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession? _____________________________________________________________________________________________ _____________________________________________________________________________________________