Exam 8: Aggregate Expenditures

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000,by how much does consumption increase?

The multiplier for imports is larger than the multiplier for exports.

Keynes believed that more government spending was necessary to solve the unemployment problem created by the Great Depression,since it was unlikely that investment or exports would increase.

What are the determinants of investment in the simple Keynesian model? Explain each determinant briefly in your response.

When the economy is in equilibrium in the simple Keynesian model:

Taxes are added to total income to form disposable income.

Keynes believed that saving is a function of:

Which expenditure component decreased the most between 1929 and 1933?

Because the private and foreign sectors of the economy were in a deep slump during the Great Depression of the 1930s,Keynes suggested an increase in:

Saving is zero when the economy is in macroeconomic equilibrium in the simple Keynesian model.

One reason so many people focus on the trade deficit is that if we import more,equilibrium income will rise,ceteris paribus.

Joe figures that if the spending multiplier is 5 and the economy needs a $10 billion increase in aggregate expenditures to reach full employment,the proper tax policy is to cut taxes by $2 billion.Critique Joe's logic.How much of a tax cut is required?

What occurs when spending is above the full employment level?

Disposable income equals:

Approximately what share of U.S.GDP is consumption?

In the simple Keynesian model,equilibrium occurs when there are no net pressures pushing the economy to move to a higher or lower level of income and output.

When withdrawals equal injections,the economy:

A depression economy has considerable slack,so:

Changes in government spending and changes in net exports have __________ multiplier effects than changes in investment spending.

AE is equal to C + I + G - (X + M).