Exam 8: Aggregate Expenditure and Output in the Short Run

If economists forecast an increase in aggregate expenditure, which of the following is likely to occur?

Examples of assets that are included in household wealth would be

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

A decrease in aggregate expenditure has what result on equilibrium GDP?

If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP, then

If the multiplier is 10, the marginal propensity to consume must be 0.1.

Figure 8.2 Alt text for Figure 8.2: In figure 8.2, a graph comparing real GDP and real aggregate expenditure. Long description for Figure 8.2: Line AE1, begins a little less than half way along the x-axis and slopes up toward the end of the x-axis.Line AE2, begins at a point half way on the x-axis and slopes up to the top right corner.Line AE2 is to the left of AE1, and is on a similar path as the line AE1.Line Y = AE, originates at the vertex and slopes upward toward the top right corner.Line Y = AE meets line AE1 at point K, half way along both lines, and meets line AE2 at point N, plotted close to the right end of the line AE2.Point J is plotted a little less than half way along the line AE1, to the left of point K.Another point L is marked close to the right end of line AE1, to the right of point K. -Refer to Figure 8.2.If the Canadian economy is currently at point K, which of the following could cause it to move to point N?

Figure 8.3 Alt text for Figure 8.3: In figure 8.3, a graph comparing real GDP and real aggregate expenditure. Long description for Figure 8.3: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars).The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line Y = AE, originates at the vertex and slopes up to the top right corner.Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Both these lines intersect at point K, approximately 3 quarters of the way along both lines.Point J is plotted a little less than half way along line AE1, to the left of point K.Point L is marked close to the right end of the line AE1, to the right of point K. -Refer to Figure 8.3. At point J in the figure above, which of the following is true?

If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal propensity to save?

Figure 8.4 Alt text for Figure 8.4: In figure 8.4, a graph comparing real GDP and real aggregate expenditure. Long description for Figure 8.4: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars).The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line AE1, begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2, begins half way along the x-axis and slopes up to the top right corner.Line AE2 is to the right of line AE1 and is on a similar path as line AE1.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE2 at point K, half way along both lines.Line Y = AE meets line AE1 at point N, plotted close to the right end of line AE1.Point J is plotted a little less than half way along line AE2, to the left of point K.Point L is marked close to the right end of line AE2, to the right of point K. -Refer to Figure 8.4.Suppose that the level of GDP associated with point K is potential GDP.If the Canadian economy is currently at point N,

Table 8.11 -Refer to Table 8.11.Using the table above, calculate the unplanned change in inventories for each level of GDP, and explain what will happen to GDP.

The aggregate expenditure model focuses on the ________ relationship between real spending and ________.

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is

Figure 8.5 Alt text for Figure 8.5: In figure 8.5, a graph comparing real GDP and real aggregate expenditure. Long description for Figure 8.5: The x-axis is labelled, real GDP, Y (billions of 2007 dollars)with values GDP1 and GDP2 marked.The y-axis is labelled, real aggregate expenditure, AE (billions of 2007 dollars).Line AE1 begins a little less than half way along the x-axis and slopes up to the end of the x-axis.Line AE2 begins at a point half way along the x-axis and slopes up to the top right corner.Line AE2 is to the left of line AE1 and is on a similar path as line AE1.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE meets line AE1 at point K, half way along both lines.Line Y = AE meets the line AE2 at point N, plotted close to the right end of line AE2.Point J is marked a little less than half way along line AE1, to the left of point K.Point L is plotted close to the right end of line AE1, to the right of point K.Points K, L, and N are connected to their respective coordinates, GDP1 and GDP2, on the x-axis with dotted lines. -Refer to Figure 8.5.Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP₁ to GDP₂.If the MPC is 0.9, then what is the change in GDP?

Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C = 1,000 + 0.8Y I = 1,500 G = 1,250 NX = 100

Sales of snowmobiles tend to

Table 8.3 -Refer to Table 8.3.Given the consumption schedule in the table above, the marginal propensity to consume is

If the marginal propensity to save is 0.35, the multiplier is 2.86.

If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?

When we graph consumption as a function of national income rather than as a function of ________, the slope of this consumption function is the ________.