OLD 55

If the aggregate consumption equals $100 million + 0.75 × YD, then autonomous consumption is:

$100 million.

(Figure: Aggregate Expenditures Curve II) Look at the table Aggregate Expenditures Curve II. The equilibrium level of real GDP in the aggregate expenditures model shown in this figure is:

$2,000.

Scenario: Consumption Spending Suppose that the consumption function is: C = $500 + 0.8 × YD, where YD is disposable income. Reference: Ref 11-5 (Scenario: Consumption Spending) Autonomous consumption is:

$500.

If real GDP is less than aggregate expenditure, then inventories will:

fall, and firms will increase their future production.

Social insurance programs are:

government programs intended to protect families against economic hardships.

When wages rise, AS shifts _____ and aggregate price levels _____.

left; rise

An increase in the price of imported oil leads to a _____ shock.

negative supply

Inventory investment can be:

negative, zero, or positive.

Falling inventories indicate _____ unplanned inventory investment and a _____ economy.

negative; growing

Transaction costs are:

the expenses of negotiating and executing a deal.

Economists use _____ as a model to explain how savers and borrowers come together to determine the equilibrium rate of interest.

the market for loanable funds

At the income-expenditure equilibrium:

unplanned inventory investment is zero.

Nominal wages are "sticky" because:

wages are slow to rise in the short run when there are labor shortages and slow to fall even when there is significant level of unemployment.

(Figure: AD-AS Model II) When consumers and firms become more optimistic about the future, which of the following will take place in the short run?

AD curve will shift to the right.

The marginal propensity to consume equals:

a change in consumption divided by a change in disposable income.

If a country has a trade surplus, we can conclude that it also has:

a net capital outflow.

Crowding out results in a(n):

decrease in private investment spending resulting from government deficit spending.

A recessionary gap is when:

aggregate output is below potential output.

If an economy is operating at an aggregate output level which is greater than its potential output level, the Federal Reserve may:

conduct an open market sale.

(Figure: Supply of Loanable Funds) Look at the figure Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

quantity supplied of loanable funds rises by $20 billion.

(Figure: The Market for Loanable Funds II) Look at the figure The Market for Loanable Funds II. An increase in government borrowing will shift the demand for loanable funds to the _____ and _____ the interest rate.

right; increase

Reserve requirements:

set the minimum amount of reserves a bank must hold.

If government increases income tax rates, the aggregate demand curve is likely to:

shift to the left.

All else being equal, if the aggregate price level falls, the planned expenditure curve will:

shift upward.

National savings is the sum of private savings and:

the budget balance.