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

Suppose exports X)=100, Y=500, and imports are equal to mY, where m is the marginal propensity to import. Net exports would be equal to zero if the marginal propensity to import were

A downward shift and steepening of the net export NX) function can be caused by

A rise in the Canadian-dollar price of foreign currency, other things being equal, causes Canadaʹs net export NX) function to shift and .

Consider the following macro model with demand-determined output: C = 150 + 0.9Yd, Yd= 0.8Y, I = 400, G = 700, T = 0.2)Y, X = 130, IM = 0.08)Y. 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, X = 130, IM = 0.08Y, T = 0. Equilibrium national income is 5000 when G is equal to

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

Consider a macro model in which output is assumed to be demand-determined. One situation which may justify this assumption is when

A parallel upward shift in the net export NX) function can be caused by

FIGURE 22-5 -Refer to Figure 22-5. Diagram 2 illustrates an economy that is experiencing an) gap. The goal of stabilization policy would be to national income until it is equal to .

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. Equilibrium national income is

An upward shift and flattening of the net export NX) function can be caused by

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. Which of the following correctly describes the consumption function for this economy?

The diagrams below show the import, export, and net export functions for an economy. FIGURE 22-1 -Refer to Figure 22-1. If actual national income in this economy is equal to $1000, then net exports are equal to

Consider the governmentʹs budget balance. Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.14Y. When Y = 2000, the government is running a budget

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 -Consider the following news headline: ʺBusiness community gloomy about the economy investment plans axed.ʺ Assuming that aggregate output is demand-determined, what effect will this have, all other things equal, on the AE function and on equilibrium national income?

Fiscal policy involves the governmentʹs use of to affect economic outcomes.

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 value of the simple multiplier in this model is

Suppose exports are $1850 and imports are given by IM = 0.13Y. At what level of national income will net exports equal zero?

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 vertical intercept of the AE function is