Exam 31: The Aggregate Expenditures Model

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government spends $80 billion at each level of GDP, and imposes a lump-sum tax of $100

If an unintended increase in business inventories occurs,

In 2008 during the Great Recession, the Federal government provided tax rebate checks to taxpayers in the hope that

Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domestic GDP.

Other things being equal, a decrease in an economy's exports will

If a lump-sum income tax of $25 billion is levied and the MPS is 0.20, the

Suppose the economy is operating at its full-employment, noninflationary GDP and the MPC is 0.75.The federal government now finds that it must increase spending on military goods by $21 billion in response to deterioration in the international political situation.To sustain full-employment, noninflationary GDP, government must

Refer to the accompanying table.The tax in the economy is a

Classical economists held the view that in the economy,

(Advanced analysis) Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy is

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

In an open mixed economy, the inflationary expenditure gap may be described as the

If an increase in aggregate expenditures results in no increase in real GDP, we can surmise that the

When there are unplanned increases in inventories, then actual investment ends up being less than planned investment.

The major basic premise of the aggregate expenditures model is that if the total demand for output increases, then firms will raise their prices.

GDP C S Ig $100 $100 $0 $80 200 160 40 80 300 220 80 80 400 280 120 80 500 340 160 80 600 400 200 80 700 460 240 80 Refer to the accompanying information for a closed economy.If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP

A $20 billion decrease in investment in a private closed economy that has an MPS of 0.5 will reduce saving by $10 billion once the multiplier process has ended.

Planned investment is $20 billion and saving is $15 billion when GDP in the economy is $180 billion.The economy

The amount by which an aggregate expenditures schedule must shift upward to achieve the full-employment GDP is a(n)

Which event would most likely decrease an economy's exports?