Exam 12: Aggregate Expenditure and Output in the Short Run

What is the macroeconomic consequence if firms accumulate large amounts of unplanned inventory at the beginning of a recession?

Explain,in detail,how the adjustment to macroeconomic equilibrium occurs when spending is less than production.Be sure to discuss how inventories play a crucial role in the adjustment process.State what happens to GDP and employment during the adjustment process.

Figure 12-1 -Refer to Figure 12-1.If the economy is at point L,what will happen?

Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that

If planned aggregate expenditure is greater than total production,

Which of the following is true?

Figure 12-1 -Refer to Figure 12-1.If the economy is at point J,what will happen?

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

An example of assets that are included in ________ would be stocks,bonds,and savings accounts.

Investment spending will decrease when

When we graph consumption as a function of national income rather than as a function of ________,the slope of this consumption function is the ________.

Each of the following is one of the four main categories of spending identified by John Maynard Keynes except

Figure 12-1 -Refer to Figure 12-1.According to the figure above,at what point is aggregate expenditure greater than GDP?

Consumer spending ________ and investment spending ________.

If planned aggregate expenditure is greater than total production,

________ consumption is consumption that depends upon the level of GDP and ________ consumption is consumption that does not depend upon the level of GDP.

If the economy is currently in equilibrium at a level of GDP that is above potential GDP,which of the following would move the economy back to potential GDP?

If consumption is defined as C = 4,500 + 0.75Y,then the marginal propensity to save is 0.25.

Figure 12-3 -Refer to Figure 12-3.Suppose that government spending increases,shifting up the aggregate expenditure line.GDP increases from GDP1 to GDP2,and this amount is $200 billion.If the MPC is 0.8,then what is the distance between N and L or by how much did government spending change?

Table 12-2 -Refer to Table 12-2.Using the table above,compute aggregate expenditure and identify the macroeconomic equilibrium.