Exam 11: Expenditure Multipliers

-In the above figure,the multiplier is equal to

What is the mathematical formula for the multiplier? Why is there a multiplier?

In the Keynesian model of aggregate expenditure,we assume that firms will

The slope of the aggregate expenditure curve increases when the marginal propensity to consume ________ or the marginal propensity to import ________.

An increase in the value of the multiplier can be caused by

If the multiplier is 3.33 and there are no imports or income taxes,then the

When the economy is at full employment and investment increases,in the long run the price level will ________ and,if potential GDP does not change,in the long run real GDP will ________.

Mauritius,an island off the coast of Africa,competes with other countries producing goods with low-skilled labor. In 2006,it was reported that its "...factories have been exposed to ...competition from China,India and other Asian mass producers." As a result,"the main export industry has seen a 30 per cent reduction in volume ..." www.ft.com,3/13/2006 The decrease in exports will cause ________ and the price level will ________.

The government estimates that the fiscal policy multiplier is 2.0.In this case an increase in government expenditure of $500 billion increases real GDP by ________ and results in an increase in induced expenditure of ________.

Mauritius,an island off the coast of Africa,competes with other countries producing goods with low-skilled labor. In 2006,it was reported that its "...factories have been exposed to ...competition from China,India and other Asian mass producers." As a result,"the main export industry has seen a 30 per cent reduction in volume ..." www.ft.com,3/13/2006 The story describes

In the very short term,planned investment ________ when GDP changes and planned consumption expenditure ________ when GDP changes.

According to the Keynesian theory,the typical firm

If investment decreases,the AE curve shifts

The value of the multiplier in the economy illustrated in the figure above is

-In the above figure,autonomous consumption equals

An increase in investment spending results in a ________ the aggregate expenditure curve and ________ the aggregate demand curve.

Which of the following makes the multiplier larger?

The positive relationship between consumption expenditure and disposable income is shown by a movement along the consumption function.

-The above figure shows the AE curve and 45° line for an economy. a) If real GDP equals $8 trillion,how do firms' inventories compare to their planned inventories? b) If real GDP equals $16 trillion,how do firms' inventories compare to their planned inventories? c) What is the equilibrium level of expenditure? Why is this amount the equilibrium?

If there are no taxes or imports and MPC = 0.75,the multiplier equals