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Exam 11: The Aggregate Expenditures Model

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Question 31

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Refer to the diagrams. Other things equal, an interest rate decrease will

A) shift curve A to the right and shift curve B upward.
B) shift curve A to the left and shift curve B downward.
C) leave curve A in place but shift curve B downward.
D) leave curve A in place but shift curve B upward.

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Question 32

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Suppose that a mixed open economy is producing at its equilibrium income and that net exports are zero. If at the equilibrium income the public sector's budget shows a surplus,

A) $C _ { a } + I _ { g } + X _ { n } + G \text { must exceed GDP. }$
B) planned investment must exceed saving.
C) a recessionary expenditure gap must exist.
D) saving must exceed planned investment.

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Question 33

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

$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Possible Levels of Domestic Output and } \\\text { Income } ( G D P = D I ) \end{array} & \text { Consumption } \\\hline \$ 320 & \$ 320 \\\hline 330 & 327 \\\hline 340 & 334 \\\hline 350 & 341 \\\hline 360 & 348 \\\hline 370 & 355 \\\hline 380 & 362 \\\hline\end{array}$ The table gives data for a private closed economy. The MPS is

Refer to the diagram for a private closed economy. The MPC and MPS are

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because

The aggregate expenditures model is built upon which of the following assumptions?

$\begin{array} { l } C = 40 + 0.8 \mathrm { Y } \\I _ { g } = 40 \\X = 20 \\M = 30\end{array}$ (Advanced analysis) The equations give information for a private open economy. The letters $Y , C , I _ { g } , X$ , and $M$ stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. International trade in this case

Refer to the diagram, which applies to a private closed economy. If gross investment is Ig1, the equilibrium GDP and the level of consumption will be

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

Refer to the diagram. If ( $\text { If } \left( C + I _ { g } \right) \text { are the private expenditures in the closed economy and } X _ { n 2 }$ are the net Exports in the open economy, we can conclude that

Exports have the same effect on the current size of GDP as

If aggregate expenditures exceed GDP in a private closed economy,

$\begin{array} { | c | c | } \hline G D P & C \\\hline \$ 140 & \$ 150 \\\hline 180 & 180 \\\hline 220 & 210 \\\hline 260 & 240 \\\hline 300 & 270 \\\hline\end{array}$ The accompanying schedule contains data for a private closed economy. All ?gures are in billions. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be

If net exports decline from zero to some negative amount, the aggregate expenditures schedule would

Refer to the diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy is

Refer to the diagram. The sizes of the multipliers associated with changes in investment and government spending in this economy are

$\begin{array}{l}\begin{array} { | c | c | } \hline \text { Gross Domestic Product } & \text { Consumption } \\\hline \$ 100 & \$ 120 \\\hline 200 & 180 \\\hline 300 & 240 \\\hline 400 & 300 \\\hline 500 & 360 \\\hline\end{array}\\\\\begin{array} { | c | c | } \hline \text { Expected Rate of Return } & \text { Amount of Investment } \\\hline 25 \% & \$ 0 \\\hline 20 & 20 \\\hline 15 & 40 \\\hline 10 & 60 \\\hline 5 & 80 \\\hline\end{array}\end{array}$ Refer to the tables of information for a private closed economy. The multiplier for this economy is