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

Consider a macro model with a constant price level and demand -determined output. A rise in the net tax rate The simple multiplier and equilibrium national income.

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 -Consider the following news headline: ʺChina signs deal to buy more Canadian wheat.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?

A movement along the net export NX) function can be caused by a change in

Consider the governmentʹs budget balance. Suppose G = 500 and the governmentʹs net tax revenue is equal to 0.2Y. The government budget is balanced when Y equals

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 trade balance at equilibrium national income is a

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 )

Consider the governmentʹs budget balance. Suppose G = 500 and the governmentʹs net tax revenue is equal to 0.25Y. When Y = 2920, the government is running a budget

The simple macro model that is considered in Chapters 21 and 22 of the textbook is characterized by

The diagram below shows desired aggregate expenditure for a hypothetical economy. Assume the following features of this economy: · marginal propensity to consume mpc) = 0.80 · 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 the net export function. An increase in domestic national income, other things being equal, is assumed to cause

Consider the net tax rate, denoted by t. Which of the following correctly defines the net tax rate?

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 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: ʺGovernment follows through on election promise cuts income-tax rate by 5 percentage points.ʺ Assuming that aggregate output is demand-determined, what will be the effect of this action, all other things equal, on the AE function and on equilibrium national income?

In a simple macro model with a constant price level, a decrease in the net tax rate causes the AE curve to

Consider a model in which output is demand-determined. If the marginal propensity to spend out of national income is 0.4, then a $0.6 billion decrease in government purchases will cause equilibrium national income to By approximately .

Suppose exports are $200 and imports are given by IM = 0.2Y. At what level of national income will net exports equal zero?

Consider the governmentʹs budget balance. Suppose G = 600 and the governmentʹs net tax revenue is 10% of Y. The government budget is balanced when Y equals

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. Equilibrium national income is

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