chapter 11 econ

If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase by:

15 billion

Incorporate government into the table by assuming that it plans to tax and spend $16 billion at each possible level of GDP. Also assume that the tax is a personal tax and that government spending does not induce a shift in the private aggregate expenditures schedule. What is the change in equilibrium GDP caused by the addition of government?

16 billion

Answer the following questions, which relate to the aggregate expenditures model: Instructions: Enter your answer as a whole number. a. Given the following: Ca = $100, Ig = $50, Xn = - $10, and G = $30, what is the economy's equilibrium GDP? b. If real GDP in an economy is currently $200, will the economy's real GDP rise, fall, or stay the same? (Click to select) Rise. Fall. Stay the same. c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca = $150, Ig = $50, Xn = $10, and G = $30, what will be the macroeconomic result? The inflationary expenditure gap and employment levels are (Click to select) above below the full-employment level.

170 fall aboce

Answer the following questions, which relate to the aggregate expenditures model: Instructions: Enter your answer as a whole number. a. Given the following: Ca = $100, Ig = $60, Xn = − $10, and G = $40, what is the economy's equilibrium GDP? b. If real GDP in an economy is currently $220, will the economy's real GDP rise, fall, or stay the same? (Click to select) Real GDP will rise. Real GDP stay the same. Real GDP will fall. c. Suppose that full-employment (and full-capacity) output in an economy is $220. If Ca = $150, Ig = $60, Xn = − $10, and G = $40, what will be the macroeconomic result? (Click to select) There is an inflationary expenditure gap and employment levels are above the full-employment level. There is an inflationary expenditure gap and employment levels are below the full-employment level.

190 real gdp will fall There is an inflationary expenditure gap and employment levels are above the full-employment level.

Suppose that a certain country has an MPC of 0.9 and a real GDP of $400 billion. If its investment spending decreases by $4 billion, what will be its new level of real GDP?

360 billion

Suppose that a certain country has an MPC of 0.8 and a real GDP of $400 billion. If its investment spending decreases by $6 billion, what will be its new level of real GDP?

370 billion

If inventories unexpectedly rise, then production __________ sales and firms will respond by __________ output.

Exceeds; reducing

True or False: If spending exceeds output, real GDP will decline as firms cut back on production.

False

True or False: The aggregate expenditures model assumes flexible prices.

False

The economy's current level of equilibrium GDP is $780 billion. The full-employment level of GDP is $800 billion. The multiplier is 4. Given those facts, we know that the economy faces ___________ expenditure gap of ________.

a recessionary; $5 billion

By how much will GDP change if firms increase their investment by $8 billion and the MPC is 0.80? change in GDP: b.If the MPC is 0.67? changhe in GDP:

a) 40 billion b) 24 billion

By how much will GDP change if firms increase their investment by $9 billion and the MPC is 0.8? Change in GDP: b. If the MPC is 0.5? Change in GDP:

a) 45 billion b) 18 billion

C = 50 + 0.8Y Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Government spending (G) is equal to $0. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures Y = C + Ig + G + Xn Intructions: Enter your answers as whole numbers. a. Calculate the equilibrium level of income or real GDP for this economy. b. What happens to equilibrium GDP if Ig changes to 10? What does this outcome reveal about the size of the multiplier?

a) 450 b) 350 c) 5

a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) Recessionary expenditure gap or Inflationary expenditure gap What will be the consequence of this gap? (Click to select) 20 million excess of employment or 20 million shortfalls of employment By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or the recessionary expenditure gap? Aggregate expenditures would have to (Click to select) decrease increase by: What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? (Click to select) Recessionary expenditure gap Inflationary expenditure gap By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? What is the multiplier in this example? c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier?

a) Recessionary expenditure gap 20 million shortfalls of employment increase 20 billion multiplier: 5 b) Inflationary expenditure gap decrease 20 billion multiplier: 5 c) MPC: 0.8 MPS: 0.2 Multiplier: 5

Shown below is the aggregate expenditures model composed of consumption and investment spending for a closed economy. a. Show the effect of a $500 addition in government spending. Instructions: Click and drag on the expenditure line to move it to the correct position given the $500 addition in government spending. The line should extend from one side of the graph to the other. b. Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the $500 addition in government purchases. Equilibrium GDP has __________

drag line up to line two increased

If total spending is just sufficient to purchase an economy's output, then the economy is:

in equilibrium

If an economy has an inflationary expenditure gap, the government could attempt to bring the economy back toward the full-employment level of GDP by _________ taxes or __________ government expenditures.

increasing; decreasing

A depression abroad will tend to ____________ our exports, which in turn will ____________ net exports, which in turn will ____________ equilibrium real GDP.

reduce; reduce; reduce