Exam 21: The Simplest Short-Run Macro Model

Consider the simplest macro model with a constant price level and demand-determined output.If national income is less than its equilibrium level,it is likely that firms' inventories are ________,and so national income tends to ________.

In a simple macro model,a decrease in households' wealth is generally assumed to

The table below shows disposable income and desired consumption for a closed economy with no government. TABLE 21-2 -Refer to Table 21-2.The marginal propensity to consume is equal to

The table below shows disposable income and desired consumption for a closed economy with no government. TABLE 21-2 -Refer to Table 21-2.The marginal propensity to save is equal to

In the simple macro model,desired investment is assumed to be autonomous with respect to national income.Which of the following will cause a shift of the investment function? 1)a decrease in interest rates 2)an increase in firms' optimism about the economy 3)an expectation of a downturn in future economic activity

Suppose disposable income for an entire economy rises from $400 billion to $440 billion and desired saving rises from $50 billion to $60 billion.We can conclude that the marginal propensity to save for this economy is

Consider the following information for an economy with demand-determined output and a constant price level.There is no government or foreign trade. TABLE 21-8 -Refer to Table 21-8.The simple multiplier in this economy is

Desired investment expenditure will generally fall as a result of which of the following changes?

The consumption function is based on the assumption that as real disposable income rises,aggregate desired consumption

Consider the simplest macro model with demand-determined output.Suppose an increase in business confidence leads firms to increase investment in new equipment by $3.5 billion.The marginal propensity to spend in this economy is 0.6.What is the eventual total new expenditure in this economy due to the increase in investment?

Suppose aggregate output is demand-determined.If the business community decreases its planned investment expenditures by $4 billion,causing equilibrium national income to fall by $12 billion,the marginal propensity to spend must be

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend in such a model is one,the simple multiplier is

The marginal propensity to save refers to the

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend in such a model is 0.6,the simple multiplier is

Consider a simple macro model with demand-determined output.In such a model,the smaller the marginal propensity to spend,the

Consider a consumption function that is upward sloping but flatter than the 45-degree line.When real disposable income rises

The simple multiplier applies to short-run situations in which the price level is constant.The simple multiplier can be defined as

Suppose aggregate output is demand-determined.If the business community decreases its planned investment expenditures by $4 billion,causing equilibrium national income to fall by $20 billion,the marginal propensity to spend must be

In a simple macro model with no government and no foreign trade,the equilibrium level of national income is the level of income at which

In a simple macro model,an increase in households' wealth is generally assumed to