Exam 22: Adding Government and Trade to the Simple Macro Model

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.Desired consumption expenditure at equilibrium national income is

The G and T components in the national-income accounts measure purchases and net taxes collected by

A rise in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift ________ and ________.

Consider an open economy that has a marginal propensity to import equal to 0.30.If national income rises by $2500,imports will rise by

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.A national income of 1200 results in desired aggregate expenditure of

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: • marginal propensity to consume (mpc)= 0.75 • net tax rate (t)= 0.20 • no foreign trade • fixed price level • all expenditure and income figures are in billions of dollars. FIGURE 22-2 Refer to Figure 22-2.What is the value of the multiplier in this economy?

Consider the AE function in a simple macro model with government and foreign trade.It is generally assumed that as real national income

Suppose aggregate output is demand determined.If the marginal propensity to spend is 0.5,and the MPC is 0.7,a $1 billion reduction in government purchases will cause equilibrium national income to ________ by ________.

Suppose real national income (Y)is equal to 800 and government purchases are equal to 200.If the government's net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?

Transfer payments made by the government affect its net tax revenues

Consider a model with demand-determined output and a constant price level.A decrease in the net tax rate causes ________ in autonomous spending and a ________ in the simple multiplier.

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Desired consumption expenditure at equilibrium national income is

In our simple macro model with government and foreign trade,the marginal propensity to consume out of disposable income is ________ whereas the marginal propensity to consume out of national income is ________.

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: • marginal propensity to consume (mpc)= 0.80 • net tax rate (t)= 0.15 • no foreign trade • fixed price level • all expenditure and income figures are in billions of dollars. FIGURE 22-3 Refer to Figure 22-3.What is the marginal propensity to spend (z)in this economy?

Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through ________ and indirectly through ________.

The table below shows national income and imports.The level of exports is fixed at $300.All figures in the table and in the questions are in millions of dollars. TABLE 22-1 Refer to Table 22-1.On a graph of the net export function for this economy,at what level of Y would the NX function intersect the horizontal axis?

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.Total autonomous spending in this model is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The trade balance at equilibrium national income is

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.The marginal propensity to spend on national income,z,is

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: • marginal propensity to consume (mpc)= 0.75 • net tax rate (t)= 0.20 • no foreign trade • fixed price level • all expenditure and income figures are in billions of dollars. FIGURE 22-2 Refer to Figure 22-2.What is the marginal propensity to spend (z)in this economy?