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Exam 30: The Aggregate Expenditures Model

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Question 71

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Saving is always equal to:

A) planned investment less unintended increases in inventories.
B) actual investment.
C) planned investment.
D) unintended changes in inventories.

E) B) and C)
F) None of the above

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Question 72

Multiple Choice

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Other things equal,the multiplier effect associated with a change in government spending is:

A) the same as that associated with a change in taxes.
B) equal to that associated with a change in investment or consumption.
C) less than that associated with a change in investment.
D) greater than that associated with a change in investment.

E) C) and D)
F) A) and C)

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Question 73

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In the private closed economy,equilibrium GDP occurs where C + I_g = GDP.

John Maynard Keynes created the aggregate expenditures model based primarily on what historical event?

Which of the following would increase GDP by the greatest amount?

If the MPC in an economy is .75,a $1 billion increase in taxes will ultimately reduce consumption by:

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

(Advanced analysis) Answer the question on the basis of the following data for a private closed economy.The letters Y,C,S,and I are used to represent real GDP,consumption,saving,and investment respectively. $\begin{array}{ccc}\underline{\text { GDP }(Y) } & \underline{\text { Consumption (C) }} & \underline{\text { Investment (I) }} \\\$ \$ 0 & \$ 60 & \$ 30 \\100 & 120 & 40 \\200 & 180 & 50 \\300 & 240 & 60 \\400 & 300 & 70 \\500 & 360 & 80\end{array}$ The equation representing the consumption schedule for the economy is:

A private closed economy includes:

Which of the following statements is correct for a private closed economy?

If a nation imposes tariffs and quotas on foreign products,the immediate effect will be to:

If net exports are positive:

The following information is for a closed economy: $\begin{array}{c}\begin{array}{c}\underline{\text { GDP }} \\\$ 100 \\200 \\300 \\400 \\500 \\600 \\700\end{array}\begin{array}{c}\underline{\text { C }}\\ \$ 100 \\160 \\220 \\280 \\340 \\400 \\460 \end{array}\begin{array}{c}\underline{\text { S}} \\\$ 0 \\40 \\80 \\120 \\160 \\200 \\240 \end{array}\begin{array}{c}I_{g} \\\hline \$ 80 \\80 \\80 \\80 \\80 \\80 \\80 \end{array}\end{array}$ Refer to the information.The addition of a $100 billion lump-sum tax:

It is true that:

(Advanced analysis) Answer the question on the basis of the following 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. $\begin{array} { l } C = 26 + 0.75 Y \\I _ { g } = 60 \\X = 24 \\M = 10\end{array}$ The multiplier for the economy is:

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

(Advanced analysis) Answer the question on the basis of the following information for a private closed economy,where I_g is gross investment,S is saving,and Y is gross domestic product (GDP) . $\begin{array} { l } I _ { g } = \overline { I _ { g } } = 80 \\\mathrm {~S} = - 80 + 0.4 \mathrm { Y }\end{array}$ Refer to the information.In equilibrium,consumption will be:

Actual investment equals saving:

(Advanced analysis) Answer the question on the basis of the following 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. $\begin{array} { l } C = 26 + 0.75 Y \\I _ { g } = 60 \\X = 24 \\M = 10\end{array}$ The equilibrium GDP for the open economy is:

Graphically,the height of the investment schedule depends on the real interest rate,together with the location of the investment demand curve.