Exam 15: Income and Expenditures Equilibrium

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4 Calculate the marginal propensity to consume for the economy from the information given in Table 10.4.

If German imports of French products are very important in determining the volume of German exports to France, we would expect the actual German spending multiplier to be larger than 1/(marginal propensity to save + marginal propensity to import).

Consider an economy that is in equilibrium with real GDP = $5, 000, MPS= 1/4 and MPI = 1/5.What will be the new equilibrium level of income if planned investment spending increases by $500?

Suppose an economy has a government budget surplus of $100, net exports of -$400, and a planned investment level of $1, 000.For this economy to be in equilibrium, saving must equal:

Injections to the economy include consumption, investment, and government spending.

Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10.By how much does spending on domestic goods increase if income increases by $300?

The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

Assume that the multiplier effect for Mexico is 0.85 when U.S.government spending increases.Therefore, a $20 billion decrease in U.S.government spending results in:

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4 Calculate the spending multiplier from the information given in Table 10.4.

If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____.

When the aggregate expenditures function of a closed economy is plotted against real GDP, any point on the 45-degree line represents C + I + G = Y, where C = Consumption, I = Investment, G = Government spending, and Y = Real GDP.

If MPS is equal to 0.15 and MPI is equal to 0.10, an initial change in expenditures of $19, 000 would result in a total change in income equal to _____.

The recessionary gap is given by the difference between potential GDP and real GDP.

The figure given below represents the leakages and injections of an economy. Figure 10.6 Refer to Figure 10.6.If 0L represents potential GDP, the GDP gap can be closed by increasing autonomous expenditures by an amount equal to line segment _____.

Scenario 10.1 Imagine an economy that does not have international trade and is originally in equilibrium.Then the government increases the level of spending by $350 million because it received a gift from abroad.In this economy, only 65 cents of every dollar is spent, and the rest is saved. Refer to Scenario 10.1.Calculate the value of the spending multiplier.

Foreign repercussions of changes in domestic spending may cause:

The spending multiplier measures the change in equilibrium income that results from a change in:

A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-economy spending multiplier of 3.33.

A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the:

Suppose an appreciation of the French franc causes U.S.prices of French wine imports to rise sharply.On the other hand, Californian wine becomes relatively inexpensive to French consumers.Other things equal, this will result in: