Exam 26: Demand-Side Equilibrium: Unemployment or Inflation

Where does equilibrium occur in an income expenditure diagram? What would be the effect if production is at either on the left or right side of the equilibrium point?

If inventory levels are decreasing, then we should expect business firms to

Recessionary gaps are most likely to be accompanied by

Which one of the following could cause a recessionary gap?

A major Internet service provider decides to spend $70 million to purchase new server equipment.If the marginal propensity to consume is 0.8, the eventual change in GDP will be

A higher price level leads to:

If saving exceeds investment, then the level of GDP will

Figure 9-4 -In Figure 9-4, if the economy is in a recessionary gap, what must happen to reach potential GDP?

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

The multiplier principle is built on the premise that one person's spending is another person's

Why do booms and recessions tend to be transmitted across national borders?

An increase in the U.S.price level will

The economy will reach equilibrium in a simple economy only if saving is

To eliminate a recessionary gap, the expenditure schedule should be

Describe the role of business inventory change in determining the equilibrium level of GDP and changes in the level of GDP.

From the demand side, the equilibrium level of GDP is one at which

Government stabilization policy

Figure 9-1 -In Figure 9-1, the economy is

Using the saving-investment approach, which of the following describes an equilibrium condition of GDP?

Equilibrium GDP on the demand side occurs when total spending