Econ Quizlet

△ taxes formula

(-MPC / 1-MPC) (△ T)

△ purchases formula

(1 / 1-MPC) (△ G)

△ Investment formula

(1 / 1-MPC) (△inflation)

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. The slope of the aggregate expenditures model line is

.80

Answer the next question based on the following list of factors that are related to the aggregate demand curve. 1) Real-Balances Effect 2) Household Expectations 3) Interest-Rate Effect 4) Personal Income Tax Rates 5) Profit Expectations 6) National Income Abroad 7) Government Spending 8) Foreign Purchases Effect 9) Exchange Rates 10) Degree of Excess Capacity Changes in which two of the factors would most likely cause a shift in aggregate demand due to a change in consumer spending?

2 and 4

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by $_____ billion

9

______ is a result of a very high inflation

Hyperinflation

A decrease in expected returns on investment will most likely shift the AD curve to the left because ___ will decrease.

Investment

The slope of the consumption function equals the ____

MPC

The slope of the consumption schedule or consumption line for a given economy is 1-_____

MPS

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation? - Business taxes have increased. - Interest rates have increased. - Wage rates have fallen. -Net exports have increased.

Net exports have increased

Expansion is portrayed as a ___ shift of aggregate supply and demand,

Rightward

____ is a result of high inflation and high unemployment.

Stagflation

As disposable income decreases, consumption ____

decreases

An upward shift off aggregate _______ is caused by an increase in national incomes abroad.

demand

_____ ____ inflation is an increase in aggregate demand, and no change in supply.

demand pull

Changes in government expenditures affect planned spending ________, by changing autonomous expenditures.

directly

If the price level decreases, then the aggregate expenditures schedule will shift and this translates into a movement ____ along the aggregate demand curve.

down

The expenditure multiplier arises because one person's additional expenditure becomes another person's additional income that will generate additional ____

expenditure

A leftward shift of Aggregate supply could be caused by an ___ in government regulation.

increase

Assuming that MPC is .75, equal increases in government spending and tax collections by $10 billion will _____ the equilibrium real GDP by $___ billion.

increase, 10

An ________ in consumer wealth and a ________ in interest rates would most likely increase aggregate demand

increase, decrease

An economy characterized by high unemployment is likely to be having a ______ expenditure gap.

recessionary

A tax cut will have a greater effect on equilibrium real GDP if the marginal propensity to _____ is _______.

save, smaller

An increase in net exports will have a greater effect on equilibrium real GDP if the marginal propensity to _____ is _____

save, smaller

Generally speaking, the greater the MPS, the ____ would be the increase in income that results from an ____ in consumption spending.

smaller, increase

The labels for the axes of the aggregate demand graph should be real domestic output on the _ axis and the price level on the _ axis.

x, y

△ real GDP formula

△Exp (Exp. multiplier)

Cost-push inflation is characterized by a(n) _____ in aggregate supply and no change in aggregate demand.

decrease

With cost-push inflation in the short run, there will be a(n) ___ in real GDP

decrease

A decrease in _____ _______ portrays a recession as a result of a decrease in government purchases

aggregate demand

MPC = change in __ / change in __

consumption, income

____ ____ inflation is a decrease in aggregate supply

cost push

A leftward shift of aggregate supply is consistent with ________ inflation in the mid-1970s.

costpush

A downward shift in Aggregate Demand can be caused by a ___ in consumer wealth

decrease