Exam 9: Aggregate Expenditure and Output in the Short Run

Explain the relationship between the marginal propensity to consume (MPC)and the aggregate expenditure line. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by:

If disposable income increases by $100 million and consumption increases by $80 million, then the marginal propensity to consume is:

The marginal propensity to consume is defined as:

Refer to Figure 9.2 for the following questions. Figure 9.2 -Suppose that in Figure 9.2, the level of GDP associated with point N is potential GDP. If the Australian economy is currently at point K:

What is the formula for the multiplier? Explain why this formula is considered to be too simple. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Using the following table, calculate the unplanned change in inventories for each level of GDP and explain what will happen to GDP. The numbers in the table are in billions of dollars. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Aggregate spending in an economy is the sum of consumption spending, investment spending, government purchases and spending on imports.

'Consumption spending' refers to ________ spending on goods and services.

What happened to government purchases between 1960 and 2016?

Which of the following is not an explanation for the decline in autonomous expenditure that occurred in Australia during the Great Depression of the 1930s?

When we graph consumption as a function of national income rather than as a function of ________, the slope of this consumption function is the ________.

Net exports usually ________ when the Australian economy is in a recession and ________ when the Australian economy is expanding.

Refer to Table 9.1 for the following questions. Table 9.1 -Refer to Table 9.1. Given the consumption schedule in the table, the marginal propensity to save is:

High interest rates cause spending by all households to fall, which reduces aggregate expenditure in the economy.

Which of the following is a true statement about the 'multiplier'?

Using the following table, calculate the unplanned change in inventories for each level of GDP and explain what will happen to GDP. The numbers in the table are in billions of dollars. _____________________________________________________________________________________________ _____________________________________________________________________________________________

During the Great Depression, economists first began studying the relationship between:

If an increase in investment spending of $30 million results in a $300 million increase in equilibrium real GDP, then the multiplier is: