Exam 11: Expenditure Multipliers

The autonomous components of aggregate expenditures are consumption, savings, and investment.

The slope of the saving function is equal to the

Equilibrium real GDP is $500 billion, government expenditures are $80 billion, the MPC = 0.9, and there are no income taxes or imports. Suppose that government expenditures increase to $100 billion. If the price level is constant, after the increase in government expenditures, equilibrium real GDP will be

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

A movement along the consumption function is the result of changes in

-In the above figure, the marginal propensity to save equals

The MPS equals the ratio of

Equilibrium expenditure occurs where

Induced consumption is equal to

-In the above figure, at the equilibrium, induced expenditure is

-In the above figure, induced expenditure is equal to $2 trillion at point

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

The marginal propensity to consume is the ________.

A movement along the consumption function to higher levels of consumption expenditure arises because

The Keynesian model of aggregate expenditure describes the economy in

-In the above figure, consumption and disposable income are equal at

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

Discuss the relationship between the business cycle and changes in autonomous expenditures.

One reason the aggregate expenditure curve slopes upward is because ________ increases when real GDP increases.

"When the price level increases, aggregate planned expenditure increases and equilibrium expenditure increases." Is the preceding statement correct or incorrect? Briefly explain your answer.