Exam 31: The Aggregate Expenditures Model

In the aggregate expenditures model, the consumption schedule is shown to be

If planned investment is larger than saving, then real GDP will increase as the economy adjusts toward equilibrium.

(Advanced analysis) Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy is

In an inflationary expenditure gap, the equilibrium level of real GDP is

What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources?

If the MPC in an economy is 0.9, a $1 billion increase in government spending will ultimately increase consumption by

Other things equal, an increase in an economy's exports will

Other things being equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n)

A recessionary expenditure gap exists if

When saving is less than planned investment in the aggregate expenditures model of a private closed economy, then

In the aggregate expenditures model, technological progress will shift the investment schedule

Assume that in a private closed economy, consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output.Thus,

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion, then

C = 26 + 0.75Y Ig = 60 X = 24 M = 10 (Advanced analysis) The equations give information for a private open economy.The letters Y, C, I g, X, and M stand for GDP, consumption, gross investment, exports, and imports, respectively.Figures are in billions of dollars.The equilibrium GDP for the open economy is

In the Great Recession of 2007-2009, the Federal government enacted a "stimulus package" that was intended to bring inflation down.

In a private closed economy, investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where investment is equal to saving.

Which of the following is not true when there is an unplanned decrease in inventories?

In the aggregate expenditures model of the economy, equilibrium is attained when planned aggregate spending equals total output.

Actual investment consists of planned investment plus unplanned changes in inventories (plus or minus).

A downward-sloping investment demand curve and a horizontal investment schedule indicate that investments are inversely related to interest rates but are not affected by the level of income.