Exam 8: The Reserve Bank and the Economy

A fiscal policy action to close an expansionary gap is to

The basic Keynesian model assumes that,in the _______,producers sell whatever is demanded at _______ prices.It,therefore,assumes that the price level is constant and the inflation rate is _______.

-Based on the Keynesian cross diagram above,short-run equilibrium output equals

If planned aggregate expenditure (PAE)in an economy equals 3,500 + 0.5Y and potential output (Y*)equals 8,000,then this economy has

If planned aggregate expenditure equals 5,000 + 0.55Y and potential output (Y*)equals 10,000,then this economy has a(n)__________ gap that can be closed by _________.

In the basic Keynesian model,to close a recessionary gap of $5 billion,taxes must be

In the basic Keynesian model,a decrease in government purchases

For an economy starting at potential output,an increase in autonomous planned aggregate expenditure in the short run results in a(n)

If firms sell less output than expected,planned investment

Suppose C = 100 + 0.6(Y - T)and T = 200,I = 150,G = 250 and NX = 50.Then,an increase in government purchases from G = 250 to G = 260 will result in an increase in Y (GDP)of

Economists tend to be critical of any balanced budget legislation that would force governments to override automatic stabilizers and __________ spending or __________ taxes in recessions to avoid deficits.

If disposable income decreases,the average propensity to consume will

The two parts of the Keynesian consumption function are consumption that depends on _________ and consumption that depends on ________.

If planned aggregate expenditure (PAE)in an economy equals 2,000 + 0.48Y and potential output (Y*)equals 4,000,then this economy has

In the real world,investments in public capital,such as roads,airports and schools,can play ________ role in the growth of an economy's potential output,while tax and transfer programs may _________ potential output by encouraging firms to increase the rate of _______.

In the basic Keynesian model,an increase in transfer payments

The basic Keynesian model shows that,as far as their effects on output go,government purchases are _________ from autonomous consumption spending,private-sector investment spending,or net exports.A $10 million increase in government purchases has _________ effect on GDP as a $10 million increase in autonomous consumption,private-sector investment spending,or net exports.

If planned aggregate expenditure (PAE)in an economy equals 1,000 + 0.5Y and potential output (Y*)equals 2,200,government purchases must ________ to eliminate any output gap.

-Based on the Keynesian cross diagram above,if output equals 4,500,planned aggregate expenditure is ________ output and firms will _________ production.

In the basic Keynesian model where the marginal propensity to consume is 0.5,government purchases must be _________,to close an expansionary gap resulting from a $1 billion increase in autonomous consumption.