Exam 3: National Income: Where It Comes From and Where It Goes

The reduction in investment brought about by the increase in the interest rate caused by increased government spending is called:

If government purchases exceed taxes minus transfer payments, then the government budget is:

According to Euler's theorem, if competitive firms pay each factor its marginal product and the production function has constant returns to scale, the sum of all factor payments will equal:

The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving:

In the neoclassical model with fixed income, if there is a decrease in taxes with no change in government spending, then public saving and private saving .

If increased immigration raises the labor force, the neoclassical theory of distribution predicts:

Total investment in the United States averages about percent of GDP.

In the classical model with fixed output, the supply and demand for goods and services are balanced by:

In a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on , the amount of investment spending depends on , and the amount of government spending is determined .

The price received by each factor of production for its services is determined by:

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:

Assume that the consumption function is given by C = 150 + 0.85(Y - T) and the tax function is given by T = t + t Y. If t Increases by 1 unit, then consumption: 0 1 0

In a closed economy, the components of GDP are:

Assume that the investment function is given by I = 1,000 - 30r, where r is the real rate of interest (in percent). Assume further that the nominal rate of interest is 10 percent and the inflation rate is 2 percent. According to the investment function, investment will be:

If the consumption function is given by C = 150 + 0.85(Y - T) and T increases by 1 unit, then savings:

The investment function slopes because there are investment projects that are profitable as the interest rate decreases.

Use the model developed in Chapter 3, but assume that consumption decreases, other things being equal, when the interest rate rises. If there is a technological advance that leads to an increase in investment demand:

The real interest rate is the: