Exam 11: The Aggregate Expenditures Model

Which two aggregate expenditure schedules AE in the diagram for a private closed economy have the same MPC, assuming investment is the same at each level of income?

In which of the following situations for a mixed open economy will the level of GDP expand?

If an unintended increase in business inventories occurs at some level of GDP, then GDP

Refer to the diagram. The change in aggregate expenditures as shown from $\left( \mathrm { C } + I _ { g } + X _ { n } \right)$ to $\left( \mathrm { C } + I _ { g } + \right.$ $X _ { n 2 }$ ) will produce

SA=−20 + 0.4Y Ig = 25 − 3i (Advanced analysis) The equations refer to a private closed economy, where S is saving, Ig is gross Investment, i is the real interest rate, and Y is GDP. In equilibrium, the level of consumption will be

In the United States from 1929 to 1933, real GDP _____________ and the unemployment rate ________________.

If at some level of GDP the economy is experiencing an unintended decrease in inventories,

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then

In a mixed open economy, the equilibrium GDP is determined at that point where

Ig = 80 SA=−80 + 0.4Y (Advanced analysis) The equations refer to a private closed economy, where Ig is gross investment, S Is saving, and Y is gross domestic product (GDP). The equilibrium GDP will be

An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because

C=26+0.75Y =60 X=24 M=10 (Advanced analysis) The equations give information for a private open economy. The letters Y, C, Ig, 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

Refer to the diagram for a private closed economy. The marginal propensity to consume is

Saving is always equal to

If an unintended increase in business inventories occurs,

In a private closed economy, when aggregate expenditures equal GDP,

C = 40 + 0.8Y Ig = 60 − 2i I = 10 (Advanced analysis) The equations are for a private closed economy, where C is consumption, Y is the Gross domestic product, Ig is gross investment, and i is the interest rate. Given that the interest rate is 10 (percent), the amount that businesses will want to invest will be

In a private closed economy, when aggregate expenditures exceed GDP,

Gross Domestic Product Consumption \ 100 \ 120 200 180 300 240 400 300 500 360 Expected Rate of Return Amount of Investment 25\% \ 0 20 20 15 40 10 60 5 80 Refer to the tables of information for a private closed economy. If the real interest rate is 20 percent, the equilibrium GDP will be

At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be