ECON Chp 11

In a mixed open economy, the equilibrium GDP exists where

Ca + Ig + Xn + G = GDP.

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

expenditures of consumers and businesses.

In an inflationary expenditure gap, the equilibrium level of real GDP is

greater than full-employment GDP

A private closed economy includes

households and businesses, but not government or international trade.

Other things equal, if $100 billion of government purchases (G) is added to private spending (C + Ig + Xn ) GDP will

increase by more than $100 billion

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to

increase domestic output and employment.

In the aggregate expenditures model, an increase in government spending may

increase output and employment

If the real interest rate falls, then the

investment schedule will shift upward

A rightward shift of the investment demand curve will

shift the investment schedule upward

A recessionary expenditure gap is

the amount by which the full-employment GDP exceeds the level of aggregate expenditures.

In the aggregate expenditures model, technological progress will shift the investment schedule

upward and increase aggregate expenditures

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

a country's net exports to fall

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

a country's net exports to fall.