ECON 2020 -- Macroeconomics - Chapter 18: Homework -- By Laken_2020 -- Published On: Thursday, April 15th, 2021

If potential output equals $8 billion and actual output equals $9 billion, then this economy has a(n):

expansionary gap.

A recession occurs when ______, when _______, or when both of these occur.

potential output grows slowly; actual output falls below potential output

When prices are predetermined, the level of output that equals aggregate expenditure is called ______ output.

short-run equilibrium

The changing age structure of the US population and more efficient labor markets are both possible explanations for:

the decline in the natural rate of unemployment.

If the marginal propensity to consume is 0.75, then a $100 increase in disposable income leads to a ______ increase in consumption.

$75

The following data give the dates of successive turning points in U.S. economic activity and the corresponding levels of real GDP at the time. ----------------------------------------- Turning Point: (A) Date: July 1953 Real GDP (1996 $ billions): 1992.2 ----------------------------------------- Turning Point: (B) Date: May 1954 Real GDP (1996 $ billions): 1941.0 ----------------------------------------- Turning Point: (C) Date: Apr. 1957 Real GDP (1996 $ billions): 2182.7 ----------------------------------------- Turning Point: (D) Date: Apr. 1958 Real GDP (1996 $ billions): 2117.4 ----------------------------------------- Turning Point: (E) Date: Apr. 1960 Real GDP (1996 $ billions): 2391.0 ----------------------------------------- Which of the turning points are peaks?

(A), (C), and (E)

Data on after-tax income and consumption spending for the Adam Smith family are given below: ----------------------------------------- After-tax Income: 9,000 Consumption Spending: 18,100 ----------------------------------------- After-tax Income: 14,000 Consumption Spending: 22,600 ----------------------------------------- After-tax Income: 19,000 Consumption Spending: 27,100 ----------------------------------------- After-tax Income: 24,000 Consumption Spending: 31,600 ----------------------------------------- Based on these data, the Adam Smith family has a marginal propensity to consume equal to:

0.9.

If the natural rate of unemployment equals 5 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:

1 percent.

When aggregate expenditure is given as Y = 200 + 0.5Y, short-run equilibrium output equals:

400.

Contrary to behavior that would be required to eliminate output gaps, many firms in the economy:

adjust their prices only periodically.

Changes in autonomous consumption could be the result of:

changes in housing prices.

Changes in government purchases affect spending:

directly.

The consumption function is relationship between consumption and:

disposable income.

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, potential output (Y*) equals 11,000, then government purchases must ______ to eliminate any output gap.

increase by 200

A fiscal policy action to close an expansionary gap is to:

increase taxes.

Changes in taxes and transfers affect spending:

indirectly, by changing disposable income and, consequently, consumption.

The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in spending on short-run equilibrium output.

larger; larger

When there is a recessionary gap, capital and labor resources are:

not being fully utilized.

According to the basic Keynesian model, in the short run, total spending affects ______, but it does not affect _______.

output; prices

The duration of a recession is measured from:

peak to trough.

For an economy starting at potential output, a decrease in one or more of the components of aggregate expenditure in the short run results in a(n):

recessionary output gap.

Wasted capital and labor resources are a problem associated with a(n) _____ gap. Increased inflation is a problem associated with a(n) _____ gap.

recessionary; expansionary

Expansionary policies are government stabilization policies intended to increase:

spending.

Government policies that are used to affect aggregate expenditure, with the objective of eliminating output gaps, are called ______ policies.

stabilization

The effect on short-run equilibrium output of a one-unit increase in expenditure is called:

the income-expenditure multiplier

In the Keynesian model a recessionary gap will develop if there is:

too little spending.

An informal definition of a recession is at least ______ consecutive quarters of declining real GDP.

two