Exam 11: Spending, Output, and Fiscal Policy

In the basic Keynesian model, a decrease in transfer payments:

For an economy starting at potential output, an increase in planned investment in the short run results in a(n):

In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset a recessionary gap resulting from a $1 billion decrease in autonomous consumption, taxes must be:

Planned aggregate expenditure is total:

If short-run equilibrium output equals 20,000 and potential output (Y*) equals 25,000, then this economy has a(n) ______ gap that can be closed by _________.

Firms do not change prices frequently because:

Unplanned inventory investment equals zero when:

A recession in Japan ______ the demand for exports from East Asian countries resulting in a reduction in autonomous expenditures in these East Asian countries and a(n) ______ output gap in the East Asian countries.

When housing prices decrease, household wealth _____, and consumption _____.

If planned aggregate expenditure (PAE) in an economy equals 3,000 + 0.75Y and potential output (Y*) equals 12,000, then this economy has:

For an economy starting at potential output, a decrease in planned investment in the short run results in a(n):

The smaller the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.

If the marginal propensity to consume is 0.75, then a $100 increase in disposable income leads to a ______ increase in consumption.

If planned aggregate expenditure (PAE) in an economy equals 2,000 + 0.8Y and potential output (Y*) equals 11,000, then this economy has:

In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, taxes must be:

Refer to the figure below. Based on the figure, and starting from an initial short-run equilibrium where output equals 20,000, if autonomous consumption spending decreases by 1,000, then the new short-run equilibrium output (Y) is equal to:

The four components of planned aggregate expenditure are:

The two parts of the Keynesian consumption function are consumption that depends on ______ and consumption that depends on _____.

In the basic Keynesian model, an increase in transfer payments:

One drawback in using fiscal policy as a stabilization tool is that fiscal policy: