Exam 8: Aggregate Expenditure and Output in the Short Run

An unplanned increase in inventories results from

The change in consumption divided by the change in disposable income is equal to

If planned investment is equal to actual investment, then aggregate expenditure is equal to GDP.

Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400

All of the following are components of aggregate expenditure except

Figure 8.1 Alt text for Figure 8.1: In figure 8.1, a graph comparing real GDP and real aggregate expenditure. Long description for Figure 8.1: 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).A line, labelled Y = AE, originates at the vertex and slopes up to the top right corner.Another line, labelled 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 three quarters of the way along both lines.Point J is plotted a little less than half way along the line AE1, to the left of point K.Point L is plotted close to the right end of the line AE1, to the right of point K. -Refer to Figure 8.1.If the economy is at point L, what will happen?

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP, then

Disposable income is defined as

Into which category of aggregate expenditure would each of the following transactions fall? a.Sandra MacMillian purchases a new Toyota Corolla made in Cambridge, Ontario. b.The city of Vancouver buys 5 new garbage trucks. c.Adrian Garcia buys a newly constructed townhome in Winnipeg. d.An airline in Latvia orders a new airplane from Bombardier. e.Magna International buys 300 new BlackBerry phones.

The consumption function describes the relationship between

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

Assume you are given the following information about an economy. C = 1191 NX = -4 G = 450 I = 323 What is the equilibrium value of real GDP?

The decrease in consumer spending during the 2008-2009 recession was due in part to falling prices in the stock market.The reason for the decline in consumer spending is most closely related to which of the following variables that determine the level of consumption?

________ spending follows a smooth trend whereas, ________ spending is more volatile and subject to fluctuations.

As a result of the drop in the oil price and resulting drop in oil production in 2015, many Alberta companies including local Tim Hortons cut production and employment.The total amount of spending in the economy is known as

________ is defined as national income + transfers - taxes.

Figure 8.8 Alt text for Figure 8.8: In figure 8.8, a graph depicting potential GDP. Long description for Figure 8.8: The x-axis is labelled, real GDP, Y (trillions of 2002 dollars)with values GDP1 and GDP2 marked.The y-axis is labelled, real aggregate expenditure, AE (trillions of 2002 dollars).Line AE1, begins a little less than half way on the x-axis and slopes up to the end of the x-axis.Line AE2, is to the right of AE1 and is on a similar path, sloping up to the top right corner.Line Y = AE, originates at the vertex and slopes up to the top right corner.Line Y = AE intersects line AE2 at point K, half way along both lines, and intersects 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 plotted close to the right end of line AE2, to the right of point K.Point K is connected to its x-coordinate, GDP1, with a dotted line.A straight line, representing potential GDP, is drawn connecting points N and L with their x-coordinate, GDP2, such that it is parallel to line connecting point K with value GDP1. -Refer to Figure 8.8.Potential GDP equals $500 billion.The economy is currently producing GDP₁, which is equal to $450 billion.If the MPC is 0.8, then how much must autonomous spending change for the economy to move to potential GDP?

If the marginal propensity to save is 0.4, the multiplier is 2.5.

________ consumption is consumption that depends upon the level of GDP, and ________ consumption is consumption that does not depend upon the level of GDP.