John Maynard Keynes created the aggregate expenditures model based primarily on what historical event? |
Great Depression. |
The aggregate expenditures model is built upon which of the following assumptions? |
Prices are fixed. |
A private closed economy includes: |
households and businesses, but not government or international trade. |
In the United States from 1929 to 1933, real GDP _____________ and the unemployment rate ________________. |
declined by 27 percent; rose to 25 percent |
In the aggregate expenditures model, it is assumed that investment: |
does not change when real GDP changes. |
All else equal, a large decline in the real interest rate will shift the: |
investment schedule upward. |
The level of aggregate expenditures in the private closed economy is determined by the: |
expenditures of consumers and businesses. |
In a private closed economy, when aggregate expenditures equal GDP: |
planned investment equals saving. |
In a private closed economy, when aggregate expenditures exceed GDP: |
business inventories will fall. |
If an unintended increase in business inventories occurs at some level of GDP, then GDP: |
is too high for equilibrium. |
A private closed economy will expand when: |
unplanned decreases in inventories occur. |
If aggregate expenditures exceed GDP in a private closed economy: |
planned investment will exceed saving. |
http://ezto.mheducation.com/13252703216803196681.tp4?REQUEST=SHOWmedia&media=image021.png Refer to the diagram for a private closed economy. Aggregate saving in this economy will be zero when: |
GDP is $60 billion. |
Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy. The average propensity to save at this level of output is: |
0.10. |
http://ezto.mheducation.com/13252703216803196681.tp4?REQUEST=SHOWmedia&media=image028.png Refer to the diagram for a private closed economy. At the $300 level of GDP: |
aggregate expenditures and GDP are equal. |
In the aggregate expenditures model, technological progress will shift the investment schedule: |
upward and increase aggregate expenditures. |
At equilibrium real GDP in a private closed economy: |
aggregate expenditures and real GDP are equal. |
Which of the following statements is correct for a private closed economy? |
Saving equals planned investment only at the equilibrium level of GDP. |
At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be: |
$38 billion. |
Planned investment plus unintended increases in inventories equals: |
actual investment. |
Saving is always equal to: |
actual investment. |
Actual investment equals saving: |
at all levels of GDP. |
Unintended changes in inventories: |
bring actual investment and saving into equality at all levels of GDP. |
At the equilibrium GDP for a private open economy: |
net exports may be either positive or negative. |
Other things equal, an increase in an economy’s exports will: |
increase its domestic aggregate expenditures and therefore increase its equilibrium GDP. |
If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to: |
increase domestic output and employment. |
If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP, then: |
Ig + Xn must equal $300 billion. |
An exchange rate: |
is the price that the currencies of any two nations exchange for one another. |
If the United States wants to increase its net exports in the short term, it might take steps to: |
depreciate the dollar compared to foreign currencies. |
Other things equal, a serious recession in the economies of U.S. trading partners will: |
depress real output and employment in the U.S. economy. |
In a mixed open economy, the equilibrium GDP exists where: |
Ca + Ig + Xn + G = GDP. |
In a mixed open economy, the equilibrium GDP is determined at that point where: |
Sa + M + T = Ig + X + G. |
Suppose the economy’s multiplier is 2. Other things equal, a $25 billion decrease in government expenditures on national defense will cause equilibrium GDP to: |
decrease by $50 billion. |
Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by: |
$40 billion. |
Other things equal, the multiplier effect associated with a change in government spending is: |
equal to that associated with a change in investment or consumption. |
A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because: |
a portion of a tax cut will be saved. |
An increase in taxes of a specific amount will have a smaller impact on the equilibrium GDP than will a decline in government spending of the same amount because: |
some of the tax increase will be paid out of income that would otherwise have been saved. |
If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause: |
an $8 billion downshift in the consumption schedule. |
Which of the following would increase GDP by the greatest amount? |
A $20 billion increase in government spending |
Which of the following would reduce GDP by the greatest amount? |
A $20 billion decrease in government spending. |
Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion. On the basis of this information, we can say that the: |
MPS in this economy is .4. |
In the aggregate expenditures model, a reduction in taxes may: |
increase saving. |
In the aggregate expenditures model, an increase in government spending may: |
increase output and employment. |
A lump-sum tax means that: |
the same amount of tax revenue is collected at each level of GDP. |
It is true that: |
equal increases in government spending and taxes increase the equilibrium GDP. |
The recessionary expenditure gap associated with the recession of 2007-2009 resulted from: |
a rapid decline in investment spending. |
In an effort to stop the U.S. recession of 2007-2009, the federal government: |
reduced taxes and increased government spending. |
(Last Word) Say’s law and classical macroeconomics were disputed by: |
John Maynard Keynes. |
(Last Word) Classical macroeconomics was dealt severe blows by: |
the Great Depression and Keynes’s macroeconomic theory. |
(Last Word) In The General Theory of Employment, Interest, and Money: |
John Maynard Keynes attacked the classical economist’s contention that recession or depression will automatically cure itself. |
econ ch. 11
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