Exam 9: The Keynesian Model in Action

Use the aggregate expenditures model and assume the marginal propensity to consume (MPC)is 0.90. A decrease in government spending of $1 billion would result in a decrease in GDP of:

Within the Keynesian aggregate expenditures model, if the economy is below equilibrium, then there will be:

In the aggregate expenditures model, if aggregate expenditures (AE)are less than GDP, then:

If the marginal propensity to consume (MPC)is 0.60, what is the expenditure multiplier?

Exhibit 9-5 Keynesian aggregate-expenditures model where the MPC is 0.75 To eliminate the GDP gap shown in Exhibit 9-5, the government should cut its spending by:

Assume the marginal propensity to consume is 0.96. Firms become pessimistic and decrease investment spending by $100 billion. Other things equal, real GDP will:

A recessionary gap is the amount by which aggregate expenditures ____ the amount required to achieve full-employment equilibrium GDP.

In the Keynesian aggregate expenditures model, "aggregate expenditures" refer to:

Within the framework of the aggregate expenditures model, which of the following is true ?

In the Keynesian model, if aggregate expenditures exceed aggregate output and inventories of firms fall, then the aggregate output and the business sector could be expected to:

In the aggregate expenditures model, if an economy operates above equilibrium GDP, there will be:

If MPC = 0.8 and the economy is in equilibrium $500 below full-employment equilibrium, how much should government spending change to achieve full employment?

In the Keynesian model, investment, government spending, and net exports are treated as autonomous expenditures, which means they are independent of:

Using the aggregate expenditures model, if aggregate expenditures (aggregate demand)is $10 trillion and aggregate output is $10.3 trillion:

As the marginal propensity to consume (MPC)increases, the spending multiplier:

Exhibit 9-4 Keynesian aggregate expenditures model In Exhibit 9-4, equilibrium real GDP is:

If aggregate expenditures exceed real GDP, then:

In the aggregate expenditures model, a tax cut causes a(n):

Which of the following policy options would not be used to eliminate an inflationary gap?

Assume that an inflationary gap must be closed by reducing aggregate expenditures. If consumers refuse to cut spending on consumption and producers won't cut demand for investment goods, the President: