Exam 25: Spending and Output in the Short Run

Induced expenditure is the portion of planned aggregate expenditure that:

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. Autonomous expenditure equals:

Refer to the accompanying figure. Based on the Keynesian cross diagram, if output equals 5,000, planned aggregate expenditure is ________ output, and firms will ________ production in response.

In the Keynesian model, a $5 billion decrease in autonomous planned investment leads to ________ in short-run equilibrium output.

Refer to the accompanying figure. Based on the figure, and starting from an initial short-run equilibrium where output equals 20,000, if autonomous consumption spending decreases by 1,000, then the new short-run equilibrium output (Y )is equal to:

In the short run, with predetermined prices, when output is less than planned aggregate expenditure:

In the short-run Keynesian model, to close a recessionary gap of $1 billion dollars government purchases must be:

When actual investment is greater than planned investment:

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 10, and potential output (Y*)equals 9,000, then government purchases must ________ to eliminate any output gap.

If short-run equilibrium output equals 50,000 and potential output (Y*)equals 45,000, then this economy has a(n)________ gap that can be closed by ________.

In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, taxes must be:

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. The slope of the expenditure line is:

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. Induced expenditure equals:

When real output decreases, planned aggregate expenditures decrease because:

In the Keynesian cross diagram, the 45-degree line represents the short-run equilibrium condition that:

Refer to the accompanying figure. Based on the figure and starting from an initial short-run equilibrium where output equals 20,000, if autonomous consumption spending increases by 1,000, then the new short-run equilibrium output (Y)is equal to:

If firms sell less output than expected, planned investment:

Firms do not change prices frequently because:

In the basic Keynesian model, a decrease in government purchases:

The two parts of the Keynesian consumption function are consumption that depends on ________ and consumption that depends on ________.