macro final ch 13

Based on these data, the Adam Smith family has a marginal propensity to consume equal to:

0.9.

Based on the figure, if autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal:

400.

Firms do not change prices frequently because:

Firms do not change prices frequently because:

In the basic Keynesian model, a tax cut:

In the basic Keynesian model, a tax cut:

Provisions in the law that automatically increase government spending or decrease taxes when real output declines are called:

automatic stabilizers

The largest component of planned aggregate expenditure is:

consumption.

Changes in government purchases affect planned spending:

directly, by changing autonomous expenditures.

The consumption function is the relationship between consumption and

disposable income.

In the basic Keynesian model all of the following are true EXCEPT:

planned investment always equals actual investment.

In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm changes:

production levels to meet the demand.

For an economy starting at potential output, a decrease in planned investment in the short run results in a(n):

recessionary output gap.

If short-run equilibrium output equals 20,000 and potential output (Y*) equals 25,000, then this economy has a(n) ______ gap that can be closed by _________.

recessionary; increasing government purchases

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

smaller; smaller