Exam 9: The Aggregate Expenditures Model

The open economy multiplier is:

Suppose that a mixed open economy is producing at its equilibrium level of income and that net exports are zero. If at the equilibrium income level the public sector's budget shows a surplus:

The table shows the consumption schedule for a hypothetical economy. All figures are in billions of dollars. -Refer to the above table. If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be:

If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will:

-In the above private open economy, international trade:

Refer to the diagram below for a private closed economy. The multiplier is:

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. -The equation representing the investment schedule for the above economy is:

The letters Y, C, S, and I are used to represent GDP, consumption, saving, and investment respectively. -The equation representing the consumption schedule for the above economy is:

A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a $10 billion increase in government expenditures.

If Canada wants to increase its net exports, other things equal, it might take steps to:

For a private closed economy, an unplanned decline in inventories suggests that:

Investment and saving are, respectively:

Refer to the above diagram for a private closed economy. At the $400 level of GDP:

-Refer to the above diagram where I_g is gross investment, X is exports, G is government purchases, S and S_a are saving before and after taxes respectively, M is imports, and T is net taxes, that is, taxes less transfers. The equilibrium level of GDP for this economy is:

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

The following information is for a closed economy: -Refer to the above information. If government now spends $80 billion at each level of GDP and taxes remain at zero, the equilibrium GDP:

Suppose the economy is operating at its full-employment-noninflationary GDP and the MPC is 0.75. The federal government now finds that it must increase spending on military goods by $21 billion in response to a deterioration in the international political situation. To sustain full-employment-noninflationary GDP government must:

If government increases lump-sum taxes by $20 billion and the economy's MPC is .6, then the:

-Refer to the above data. If gross investment is $120, the equilibrium level of GDP will be:

Imports have the same macroeconomic effect on GDP as: