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

Why are government expenditures such as Old Age Security payments, employment insurance payments, or welfare benefits paid to individuals not considered part of G, the government component of aggregate expenditure?

Consider a simple macro model with government and foreign trade and where the price level is taken as given. The simple multiplier is equal to

If the price level is taken as given in a simple macro model with demand-determined output, it is implicitly being assumed that

A parallel downward shift in 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. What is the level of autonomous consumption?

Consider the governmentʹs budget balance. Suppose G = 300 and the governmentʹs net tax revenue is equal to 0.12Y. The government budget is balanced when Y equals

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 -In an open economy with government and demand-determined output, an increase in the equilibrium level of national income could be caused by

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 is equal to $2000, then imports are equal to

FIGURE 22-5 -Refer to Figure 22-5. Diagram 1 illustrates an economy that is experiencing an) gap. The goal of stabilization policy would be to national income until it is equal to .

Transfer payments made by the government affect its net tax revenues

The table below shows national income and imports. The level of exports is fixed at $300. All figures in table and questions) are in millions of dollars. TABLE 22-1 -Refer to Table 22-1. In this economy, if actual national income increases by $600, the level of imports will

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

An increase in the value of the simple multiplier can be caused by

Consider the simplest macro model with demand-determined output. The equations are: C = 150 + 0.8Yd, Yd = Y -T, I = 400, G = 700, T = .2Y, X = 130, and IM = 0.14Y. The marginal propensity to spend on national income in this model is

In the simple macro model that is considered in Chapters 21 and 22 of the textbook,

Suppose that real national income Y) is equal to 800 and that government purchases are equal to 200. If the governmentʹs 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?

Suppose exports are $940 and imports are given by IM = 0.1Y. At what level of national income will net exports equal zero?

Consider the simplest macro model with demand-determined output. The equations are: C = 150 + 0.8Yd, Yd = Y-T, I = 400, G = 700, T = .2Y, X = 130, and IM = 0.14Y. Autonomous expenditures in this model are

Consider the governmentʹs budget balance. Suppose G = 300 and the governmentʹs net tax revenue is 0.3Y. The government budget is in surplus only when Y is

The AE function for an open economy with government can be written as