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

Consider the following news headline: "Minister of Defence announces $2 billion purchase of military helicopters." Assuming that aggregate output is demand-determined,and that the helicopters are purchased domestically,what will be the effect of this action,all other things equal,on the AE function and equilibrium national income?

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,X = 130,IM = 0.08Y,T = 0.Equilibrium national income is 5000 when G is equal to

Consider a simple macro model with demand-determined output and the following specific parameter values: a) Marginal propensity to consume out of disposable income = 0.6 b) Marginal propensity to consume out of national income = 0.48 c) Marginal propensity to import = 0.23 The simple multiplier without government and foreign trade in this economy is ________ and the simple multiplier with government and foreign trade in this economy is ________.

The table below shows national income and imports.The level of exports is fixed at $300.All figures (in table and questions)are in millions of dollars. TABLE 22-1 -Refer to Table 22-1.On a graph of the net export function for this economy,at what level of Y would the NX function intersect the horizontal axis?

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 the level of autonomous consumption?

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 correctly describes the consumption function for this economy?

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals

Government's transfer payments to individuals affect desired aggregate expenditure

Consider the following news headline: "Government follows through on election promise-cuts income-tax rate by 5 percentage points." Assuming that aggregate output is demand-determined,what will be the effect of this action,all other things equal,on the AE function and on equilibrium national income?

Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 150 + 0.84Y,I = 400,G = 700,T = 0,X = 130,IM = 0.08Y.The trade balance at equilibrium national income is a

Consider a simple macro model with government and foreign trade and where the price level is taken as given.The simple multiplier is equal to

Consider an open economy that has a marginal propensity to import equal to 0.30.If national income rises by $2500,imports will rise by

Consider a consumption function in a simple macro model with government and taxes.Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income,the marginal propensity to consume out of national income is

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.The vertical intercept of the AE function is

An increase in the value of the simple multiplier can be caused by

The net export (NX)function crosses the horizontal axis at a level of national income where the

When compared to a simple macroeconomic model (with only consumption and investment),adding government and foreign trade to the AE function causes

The diagrams below show the import,export,and net export functions for an economy. FIGURE 22-1 -Refer to Figure 22-1.The net export function for this economy can be expressed as

FIGURE 22-5 -Refer to Figure 22-5,Diagram 2.Which of the following fiscal policy measures could the government implement to return national income to the full-employment level of GDP (potential output,Y*)?

Consider a model in which output is demand-determined.If the marginal propensity to spend out of national income is 0.4,then a $0.6 billion decrease in government purchases will cause equilibrium national income to ________ by approximately ________.