Exam 19: The Spending Allocation Model

Ceteris paribus, a rise in U.S. interest rates

The intersection between the sum of the nongovernment shares of GDP and the share of GDP available for nongovernment use determines

The national saving rate

If the sum of the consumption and investment shares of GDP is 78 percent, the government share of GDP has to be less than or equal to 22 percent.

Suppose the government share of GDP is 20 percent and the consumption, investment, and net export shares of GDP are 60, 15, and 5 percent, respectively. If the dollar exchange rate increases, then we would expect

The investment share line will become flatter if investment becomes more sensitive to changes in the real interest rate.

The net export share has been negative for the last 30 years.

All else being equal, if consumption rises as a share of GDP, then

Suppose the government share of GDP is 20 percent and the consumption, investment, and net export shares of GDP are 60, 15, and 5 percent, respectively. If the federal government introduces a national sales tax (a federal tax on consumption), then we would expect

When the real interest rate falls,

In a market economy, the interest rate adjusts to ensure equality among

Which of the following situations best explains a rightward shift in the consumption share line?

Which of the following situations best explains a leftward shift in the consumption share line?

The investment share of GDP is expressed as

To bring about an increase in the share of GDP available for nongovernment use,

An increase in X does not affect the national saving rate schedule.

Since the late 1980s, the government purchases share has gone up, and the investment and consumption shares have gone down.

An increase in interest rates will cause the nongovernment share of GDP to decline.

The interest rate that pertains to the spending allocation model is the

Draw a production possibilities frontier with the government spending share on the horizontal axis and the nongovernment share of GDP on the vertical axis. All else being equal, assume there is an increase in government purchases.