Macroeconomics Chapter 11

If the MPC in an economy is 0.75, a $1 billion increase in taxes will ultimately reduce consumption by

$3 billion.

In a mixed open economy, the equilibrium GDP exists where

Ca + Ig + Xn + G = GDP.

The level of aggregate expenditures in a mixed open economy consists of

Ca + Ig + Xn + G.

In a mixed open economy, the equilibrium GDP is determined at that point where

Sa + M + T = Ig + X + G.

If the United States wants to increase its net exports, it might take steps to

depreciate the dollar compared to foreign currencies.

Other things equal, a serious recession in the economies of U.S. trading partners will

depress real output and employment in the U.S. economy.

If at some level of GDP the economy is experiencing an unintended decrease in inventories,

domestic output will increase.

The level of aggregate expenditures in the private closed economy is determined by the

expenditures of consumers and businesses.

If the multiplier in an economy is 5, a $20 billion increase in net exports will

increase GDP by $100 billion.

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to

increase by $45 billion.

If an unintended increase in business inventories occurs at some level of GDP, then GDP

is too high for equilibrium.

At the equilibrium GDP for a private open economy,

net exports may be either positive or negative.

The equilibrium level of GDP is associated with

no unintended changes in inventories.

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

shift downward.

In a mixed closed economy,

taxes and savings are leakages, while investment and government purchases are injections.

A private closed economy will expand when

unplanned decreases in inventories occur.

If an unintended increase in business inventories occurs,

we can expect businesses to lower the level of production.

An upward shift of the aggregate expenditures schedule might be caused by

a decrease in imports, with no change in exports.

At equilibrium real GDP in a private closed economy,

aggregate expenditures and real GDP are equal.

For a private closed economy, an unintended decline in inventories suggests that

aggregate expenditures exceed production.

If the dollar appreciates relative to foreign currencies, we would expect the

country's net exports to fall.

If government increases its tax revenues by $15 billion and the MPC is 2/3, then we can expect the equilibrium GDP to

decrease by $30 billion.

Suppose the economy's multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to

decrease by $50 billion.

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then

U.S. real GDP will fall.

If unintended increases in business inventories occur, we can expect

a decline in GDP and rising unemployment.