Exam 19: The Spending Allocation Model

If net exports become less sensitive to changes in the exchange rate,the net export share of GDP will get steeper.

The national saving rate,S/Y,is equal to 1 minus the government share.

The consumption share line is very sensitive to changes in inflation.

Suppose the government share of GDP is 25 percent and the consumption,investment,and net export shares of GDP are 60,12,and 3 percent,respectively.If the dollar exchange rate increases,then we would expect

Suppose the government's share of GDP declines by 10 percent.Draw a diagram to show what the I/Y and X/Y curves will look like if there is very little change in the interest rate.Does this mean that nongovernment spending is not sensitive to changes in the interest rate? Explain.

If the government share of GDP equals 25 percent of GDP and the nongovernment share of GDP equals 80 percent of GDP,then

An increase in X does not affect the national saving rate schedule.

All else being equal,an increase in the rate of interest

Which of the following statements is true?

Which of the four spending shares is the largest?

The spending allocation model applies more to the long run than to the short run.

The nongovernment share of GDP equals

If net exports become less sensitive to changes in exchange rates,the crowding-out effect of government spending will increase.

The United States currently runs two large deficits,one on its budget account and one on its current account.

The consumption share of GDP must grow for the living standards of the average person to improve.

The initial effect of an increase in the share of government purchases is

The effect a change in the sales tax has on investment depends,in part,on how sensitive net exports are to changes in the exchange rate.

The real interest rate,in the long run,is determined by

If the real interest rate increases and the investment tax credit is abolished,the investment share will increase.

Saving by households can be thought of as