Economics 101: Aggregate Expenditures part 2 ALA Assignment

Calculate Ye for Country A using the following information: A= $100, G = $80, I = $150, NX = −$50, T = $125, and MPC = 0.75.

$745

Given the equilibrium equation: 'Y_e=(1/(1-MPC))(A+I+G+NX)+((-MPC)/(1-MPC))T' which term represents the tax multiplier?

'(-MPC)/(1-MPC)'

Given the equilibrium equation: 'Y_e=(1/(1-MPC))(A+I+G+NX)+((-MPC)/(1-MPC))T' which term represents the GDP or expenditures multiplier?

'1/(1-MPC)'

With an MPC of 0.5, the tax multiplier will equal ___________.

-1

Mathematically, the tax multiplier equals:

-MPC/(1 - MPC).

Mathematically, the expenditures multiplier equals:

1/(1 - MPC).

The formula for consumption is:

A + MPC x (Y - T).

The equilibrium condition of the aggregate expenditures model is:

AE = Y Y = C + I + G + NX

___________ expenditures equals autonomous expenditure plus the marginal propensity to consume times income minus taxes plus gross investment plus government purchases plus net exports.

Aggregate

You are an economist in the country of Econlandia trying to estimate the equilibrium level of output. You have the following information: C = A + 0.4(Y−T)A = $75I = $200G = $150NX = −-$75T = $200

Blank 1: $450 or 450

With an MPC of 0.5, the tax multiplier will equal

Blank 1: -1

With an MPC of 0.75, the tax multiplier will equal

Blank 1: -3

With an MPC of 0.75, the tax multiplier will equal ___________.

Blank 1: -3

If taxes increase by $5 billion and real GDP decreases by $20 billion, the tax multiplier is ___________.

Blank 1: -4

Starting in equilibrium with real GDP equal to $800 billion gross investment equal to $20 billion a marginal propensity to consume of 0.75 and an expenditures multiplier of 4. If gross investment increases by $10 billion the aggregate expenditures schedule shifts vertically by $ ___________ billion. The new equilibrium GDP will be $ ___________ billion.

Blank 1: 10 or ten Blank 2: 840 or eight hundred forty

If the MPC equals 0.8, a decrease in taxes of $4 billion will result in an overall increase in real GDP of $ ___________ billion

Blank 1: 16 or sixteen

If the MPC equals 0.8, a decrease in taxes of $4 billion will result in an overall increase in real GDP of $ ___________ billion.

Blank 1: 16 or sixteen

If the multiplier equals 5, an increase in investment spending of $5 billion will result in an overall increase in real GDP of $ ___________ billion

Blank 1: 25 or twenty five

If the multiplier equals 5, an increase in investment spending of $6 billion will result in an overall increase in real GDP of $ ___________ billion.

Blank 1: 3 or three

If investment spending increases by $4 billion and real GDP increases by $16 billion, the expenditures multiplier is ___________.

Blank 1: 4 or four

If investment spending increases by $5 billion and real GDP increases by $20 billion, the expenditures multiplier is ___________.

Blank 1: 4 or four

If the multiplier equals 4, an increase in investment spending of $10 billion will result in an overall increase in real GDP of $ ___________ billion.

Blank 1: 4 or four

If the multiplier equals 4, an increase in investment spending of $10 billion will result in an overall increase in real GDP of $ ___________.

Blank 1: 4 or four

With an MPC of 0.75, the expenditures multiplier will equal __________

Blank 1: 4 or four

With an MPC of 0.75, the expenditures multiplier will equal ___________.

Blank 1: 4 or four

If investment spending increases by $100 billion and real GDP increases by $500 billion, the expenditures multiplier is ___________.

Blank 1: 5 or five

If investment spending increases by $15 billion and real GDP increases by $75 billion, the expenditures multiplier is ___________.

Blank 1: 5 or five

With an MPC of 0.8, the expenditures multiplier will equal ___________

Blank 1: 5 or five

With an MPC of 0.8, the expenditures multiplier will equal ___________.

Blank 1: 5 or five

A + [MPC x (Y - T)] = ___________

Blank 1: consumption or C

The ___________ line represents the combinations where aggregate expenditures and real GDP equal one another.

Blank 1: equilibrium, 45 degree, 45°, 45-degree, or 45

In the aggregate expenditures model, output or real GDP is driven by __________ (one word).

Blank 1: expenditure or expenditures

When the aggregate expenditures model is in equilibrium, ___________ equal income (or real GDP).

Blank 1: expenditures

A change in real GDP equals the ___________ multiplier times the initial change in expenditures.

Blank 1: expenditures or expenditure

The aggregate ___________ model states that in equilibrium output, or real GDP, Y, will be equal to expenditures, C plus I plus G plus NX.

Blank 1: expenditures or expenditure

The multiplier effect on real GDP from a change in expenditures and its size is determined by the ___________ multiplier

Blank 1: expenditures or expenditure

When consumption, investment, government spending, and net exports are summed up, the result is called aggregate ___________.

Blank 1: expenditures or expenditure

If output is higher than the full-employment level, ___________ are too high.

Blank 1: expenditures, expenditure, or spending

If actual output is less than the full-employment level, the current unemployment rate is ___________ than the natural rate of unemployment.

Blank 1: higher, more, or greater

The equilibrium condition of the aggregate expenditures model is ___________

Blank 1: income or Y

The equilibrium condition of the aggregate expenditures model is ___________.

Blank 1: income or Y

If the MPC equals 0.8, a decrease in taxes of $2 billion will result in an overall ___________ in real GDP of $ ___________ billion.

Blank 1: increase or rise Blank 2: 8 or eight

The difference between expenditures at the full-employment level of output and expenditures when output is ___________ than the full-employment level is called a recessionary gap.

Blank 1: less, below, or lower

In the business cycle, the high points are known as ___________ and the low points are known as ___________.

Blank 1: peaks or peak Blank 2: troughs or trough

The difference between expenditures at the full-employment level of output and expenditures when output is less than the full-employment level is called a(n) ___________ gap.

Blank 1: recessionary or recession

When graphing the investment demand, place the interest rate on the ___________ _ axis and the quantity of investment on the ___________ _ axis.

Blank 1: vertical or Y Blank 2: horizontal or X

If gross investment increases, it will shift the aggregate expenditures schedule ___________ (one word) by an amount equal to gross investment.

Blank 1: vertically, up, or upward

The aggregate expenditures model states that in equilibrium output or real GDP (Y) will be equal to:

C plus I plus G plus NX.

The aggregate expenditures model states that in equilibrium output, or real GDP, Y, will be equal to:

C plus I plus G plus NX.

Which of the following variables influence investment decisions?

Interest rate Expected rate of return

Mathematically, the expenditures multiplier is equal to:

a change in real GDP divided by the corresponding change in aggregate expenditures.

The expenditures multiplier is used to calculate:

a change in real GDP whenever expenditures such as consumption gross investment government purchases or net exports change.

The expenditures multiplier times the initial change in expenditures equals:

a change in real GDP.

The tax multiplier times the initial change in taxes equals:

a change in real GDP.

Disposable income refers to:

after-tax income.

Adding the given level of government purchases to consumption and gross investment increases ___________ expenditures by the level of government purchases.

aggregate

Adding the given level of gross investment to consumption increases ___________ expenditures by the level of gross investment.

aggregate

If gross investment increases, it will shift the ________ vertically by an amount equal to gross investment.

aggregate expenditures schedule

The equilibrium level of real GDP is found at the intersection of the:

aggregate expenditures schedule and the equilibrium line.

Adding a given level of government purchases to consumption and investment increases ________ by the level of ________.

aggregate expenditures; government spending

Adding the given level of gross investment to consumption increases ________ by the level of ________.

aggregate expenditures; gross investment

Adding the given level of net exports to consumption, investment, and government purchases increases ________ by the level of ________.

aggregate expenditures; net exports

Due to the multiplier effect,:

an initial change in aggregate expenditure leads to a larger final change in real GDP.

The equilibrium line or 45-degree line represents the combinations where aggregate expenditures and real GDP:

are equal.

Aggregate expenditures equals:

autonomous expenditure plus the marginal propensity to consume times income minus taxes plus gross investment plus government purchases plus net exports.

Consumption equals

autonomous expenditure plus the marginal propensity to consume times income minus taxes.

In the real world, exports and imports:

change as income, or real GDP, changes

The peaks and troughs that we observe in the business cycle are the result of:

changes in consumption gross investment government purchases or net exports.

When taxes increase:

consumer expenditures fall. disposable income decreases.

Suppose there is an increase in taxes of $20. If the MPC equals 0.8 consumption will _____ by $_____.

decrease; 16

When using the aggregate expenditures model, if expenditures change, the model will move to a new ___________.

equilibrium

In the aggregate expenditures model, output or real GDP is driven by:

expenditure

If output is higher than the full-employment level then:

expenditures are too high.

Expenditures in an economy depend on:

expenditures of households, firms, government, and buyers in other countries.

The government purchases schedule is:

horizontal

The investment schedule is:

horizontal.

A change in disposable income matters most to __ when making economic decisions.

households

The aggregate expenditures schedule shifts vertically by an amount equal to gross investment:

if gross investment increases.

Suppose there is a decrease in taxes of $15. If the MPC equals 0.8 consumption will _____ by $_____.

increase; 12

Expected rate of return and interest rate are two factors that:

influence the investment decisions of firms.

If there is only consumption spending, the equilibrium level of real GDP is found at the:

intersection of the consumption schedule and the equilibrium line.

Expenditures on real GDP come from four sources:

investment government consumption net exports

Higher taxes lead to:

less disposable income.

The investment schedule shows the:

level of investment at each level of real GDP.

When describing the words 'interest' and 'investment,' use:

lowercase i to refer to the interest rate and uppercase I when discussing gross investment.

A fully employed economy is one that is operating at what economists call the:

natural rate of unemployment.

A horizontal line showing the relationship between net exports and real GDP is called the net exports ___________.

schedule

A change in real GDP equals the ___________ multiplier times the initial change in taxes.

tax

Mathematically, the tax multiplier is equal to:

the change in real GDP divided by the initial change in taxes.

When using the aggregate expenditures model, if expenditures change:

the model will move to a new equilibrium.

Because the only category of spending that depends on income is consumption,:

the slope of the aggregate expenditures line is the same as the slope of the consumption schedule.

Adding a given level of government purchases to gross investment and consumption shifts the aggregate expenditures schedule:

vertically by an amount equal to government purchases.

Adding a given level of gross investment to consumption shifts the aggregate expenditures schedule:

vertically by an amount equal to gross investment.

Investment government spending and net exports are affected by:

very different economic variables so any change to government policy will likely affect them differently.