Exam 22: Spending, Output, and Fiscal Policy

Historically speaking,a one dollar decrease in household wealth will cause consumer spending to fall by:

If short-run equilibrium output equals 10,000,the income-expenditure multiplier equals 10,and potential output (Y*)equals 9,000,then government purchases must ______ to eliminate any output gap.

As disposable income increases,consumption:

Government policy actions intended to decrease planned spending and output are called ______ policies.

In the basic Keynesian model all of the following are true EXCEPT:

If planned aggregate expenditure (PAE)in an economy equals 1,000 + 0.9Y and potential output (Y*)equals 9,000,then this economy has:

In the short run with predetermined prices,when output is less than planned aggregate expenditure:

When actual investment is greater than planned investment:

Provisions in the law that imply automatic increases in government spending or decreases in taxes when real output declines are called:

In the short run with predetermined prices,when output is less than planned aggregate expenditure,firms will:

The smaller the mpc,the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.

Changes in taxes and transfers affect planned spending:

In Econland autonomous consumption equals 700,the marginal propensity to consume equals 0.80,net taxes are fixed at 50,planned investment is fixed at 100,government purchases are fixed at 100,and net exports are fixed at 40.Planned aggregate expenditure equals:

In the basic Keynesian model,a tax cut:

For an economy starting at potential output,a decrease in autonomous expenditure in the short run results in a(n):

One drawback in using fiscal policy as a stabilization tool is that fiscal policy:

A fiscal policy action to close an expansionary gap is to:

If the marginal propensity to consume equals 0.75,then a $100 increase in after-tax disposable income leads to a ______ increase in consumption.

In the short-run Keynesian model where the marginal propensity to consume is 0.75,to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption,transfers must be:

In the short-run Keynesian model,to close an expansionary gap of $10 billion dollars government purchases must be: