Exam 8: Aggregate Expenditures

The average propensity to consume is

Changes in technology are a determinant of investment.

Changes in spending modify income by an amount equal to the change in spending.

If the marginal propensity to consume is 0.8, full-employment output is $14 trillion, and current output is $13.5 trillion, then investment spending must _____ to reach full-employment output.

When the consumption schedule lies above the 45-degree reference line, consumption spending is _____ than income and saving is _____.

The balanced budget multiplier does not depend on the marginal propensity to consume.

In both the simple Keynesian model and the full Keynesian model, the sum of injections of spending must equal the sum of withdrawals at equilibrium.

When Tyson's income was $50,000 per year, his consumption was $47,500, and his saving was $2,500. Tyson recently got a $5,000 raise. He raised his consumption to $51,500 and his saving to $3,500. After the raise, Tyson's average propensity to consume is

Disposable income equals income minus government spending.

When the consumption schedule lies below the 45-degree reference line, saving

What occurs when spending is above the full employment level?

If John's Clean Clones builds a factory that costs $1 billion, and the marginal propensity to consume is 0.75, how much does the macroeconomic equilibrium increase by?

The GDP gap divided by the multiplier yields the

In the Keynesian macroeconomic equilibrium

The balanced budget multiplier is

In the Keynesian framework, the way to fight a recession is to

The difference between disposable income and consumption is savings.

(Graph: Consumption) Based on the information provided in the graph, the marginal propensity to consume equals

In the simple Keynesian model, the economy will be in equilibrium when

Explain the multiplier process, how it is computed, and why it operates in both directions. Include formulas and an example.