Exam 22: Adding Government and Trade to the Simple Macro Model

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: ∙ marginal propensity to consume (mpc)= 0.75 ∙ net tax rate (t)= 0.20 ∙ no foreign trade ∙ fixed price level ∙ all expenditure and income figures are in billions of dollars. FIGURE 22-2 -Refer to Figure 22-2.What is the value of the multiplier in this economy?

FIGURE 22-4 -Refer to Figure 22-4.The rotation from AE₀ to AE₁ could be caused by

A decrease in domestic national income will cause a ________ the net exports (NX)function.

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: ∙ marginal propensity to consume (mpc)= 0.80 ∙ net tax rate (t)= 0.15 ∙ no foreign trade ∙ fixed price level ∙ all expenditure and income figures are in billions of dollars. FIGURE 22-3 -Refer to Figure 22-3.Which of the following equations describes the aggregate expenditure function for this economy?

In the simple macro model that is considered in Chapters 21 and 22 of the textbook,

Consider the government's budget balance.Suppose G = 600 and the government's net tax revenue is 10% of Y.The government budget is balanced when Y equals

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.A national income of 1200 results in desired aggregate expenditure of

Suppose aggregate output is demand determined.If the marginal propensity to spend is 0.5,and the MPC is 0.7,a $1 billion reduction in government purchases will cause equilibrium national income to ________ by ________.

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is equal to 0.12Y.The government budget is balanced when Y equals

Suppose exports are $1850 and imports are given by IM = 0.13Y.At what level of national income will net exports equal zero?

Consider the simplest macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The marginal propensity to spend on national income,z,is

The diagrams below show the import,export,and net export functions for an economy. FIGURE 22-1 -Refer to Figure 22-1.If actual national income in this economy is equal to $1000,then net exports are equal to

Consider the following news headline: "Canadian exporters hurt by foreign recession." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

Consider a macro model in which output is assumed to be demand-determined.One situation which may justify this assumption is when

Consider the following news headline: "Business community gloomy about the economy-investment plans axed." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

FIGURE 22-4 -Refer to Figure 22-4.The rotation from to could be caused by

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.If national income is 2400,then desired aggregate expenditure is

Suppose that the marginal propensity to consume out of disposable income is 0.6 and the marginal propensity to import is 0.14.If the net tax rate is 0.1,then what is the marginal propensity to spend in this economy?

Consider a simple macro model with a constant price level and demand-determined output.When national income falls short of desired aggregate expenditures,unplanned inventory ________ will induce firms to ________ the rate of output production.

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy: ∙ marginal propensity to consume (mpc)= 0.80 ∙ net tax rate (t)= 0.15 ∙ no foreign trade ∙ fixed price level ∙ all expenditure and income figures are in billions of dollars. FIGURE 22-3 -Refer to Figure 22-3.What is total autonomous expenditure?