question

John Maynard Keynes created the aggregate expenditures model based primarily on what historical event?

answer

Great Depression

question

The aggregate expenditures model is built upon which of the following assumptions?

answer

prices are fixed

question

A private closed economy includes:

answer

households and businesses, but not government or international trade

question

In the United STates from 1929 to 1933, real GDP ____ and the unemployment rate ____.

answer

declined by 27 percent, rose to 25 percent

question

In the aggregate expenditures model, it is assumed that investment:

answer

does not change when real GDP changes

question

All else equal, a large decline in the real interest rate will shift the:

answer

investment schedule upward

question

The level of aggregate expenditures in the private closed economy is determined by the:

answer

expenditures of consumers and businesses

question

In a private closed economy, when aggregate expenditures equal GDP:

answer

planned investment equals saving

question

In a private closed economy, when aggregate expenditures exceed GDP:

answer

business inventories will fall

question

If an unintended increase in business inventories occurs at some level of GDP, then GDP:

answer

is too high for equilibrium

question

A private closed economy will expand when:

answer

unplanned decreases in inventories occur

question

If aggregate expenditures exceed GDP in a private closed economy:

answer

planned investment will exceed saving

question

Actual investment is $62 billion at an equilibrium output of $620 billion in a private closed economy. The average propensity to save at this level of output is:

answer

0.10

question

In the aggregate expenditures model, technological progress will shift the investment schedule:

answer

upward and increase aggregate expenditures

question

At equilibrium real GDP in a private closed economy:

answer

aggregate expenditures and real GDP are equal

question

Which of the following statements is correct for a private closed economy:

answer

saving equals planned investment only at the equilibrium level of GDP

question

At the $180 billion equilibrium level of income, saving $38 billion in a private closed economy. Planned investment must be:

answer

$38 billion

question

Planned investment PLUS unintended increases in inventories equals:

answer

actual investment

question

Saving is always equal to:

answer

actual investment

question

Actual investment equals saving:

answer

at all levels of GDP

question

Unintended changes in inventories:

answer

bring actual investment and saving into equality at all levels of GDP

question

At the equilibrium GDP for a private open economy:

answer

net exports may be either positive or negative

question

Other things equal, an increase in an economy's exports will:

answer

increase its domestic aggregate expenditures and therefore increase its equilibrium GDP

question

If a nation imposes tariffs and quotas on foreign products, the immediate effect will be to:

answer

increase domestic output and employment

question

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at the level of GDP, then:

answer

Ig+Xn must equal $300 billion

question

An exchange rate:

answer

is the price that the currencies of any two nations exchange for one another

question

If the United States wants to increase its net exports in the short term, it might take steps to:

answer

depreciate the dollar compared to foreign countries

question

Other things equal, a serious recession in the economies is U.S. trading partners will:

answer

depress real output and employment in the U.S. economy

question

In a mixed open economy, the equilibrium GDP exists where:

answer

Ca+Ig+Xn+G=GDP

question

In a mixed open economy, the equilibrium GDP is determined at that point where:

answer

Sa+M+T=Ig+X+G

question

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:

answer

decrease by $50 billion

question

Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by:

answer

$40 billion

question

Other things equal, the multiplier effect associated with a change in government spending is:

answer

equal to that associated with a change in investment or consumption

question

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than a $1 decline in taxes because:

answer

a portion of a tax cut will be saved

question

An increase in taxes of a specific amount will have a smaller impact of the equilibrium GDP than will a decline of government spending of the same amount because:

answer

some of that tax increase will be paid out of income that would otherwise have been saved

question

If the MPC is 2/3, the initial impact of an increase of $12 billion in lump-sum taxes will be to cause:

answer

an $8 billion downshift in the consumption schedule

question

Which of the following would increase GDP by the greatest amount?

answer

a $20 billion increase in government spending

question

Which of the following would reduce GDP by the greatest amount?

answer

a $20 billion decrease in government spending

question

Suppose government finds it can increase the equilibrium real GDP by $45 billion by increasing government purchases by $18 billion. On the basis of this information, we can say that the:

answer

MPS in this economy is .4

question

In the aggregate expenditures model, a reduction in taxes may:

answer

increase saving

question

In the aggregate expenditures model, an increase in government spending may:

answer

increase output and employment

question

A lump-sum tax means that:

answer

the same amount of tax revenue is collected at each level of GDP

question

It is true that:

answer

equal increases in government spending and taxes increase the equilibrium GDP

question

The recessionary expenditure gap associated with the recession of 2007-2009 resulted from:

answer

a rapid decline in investment spending

question

In an effort to stop the U.S. recession of 2007-2009, the federal government:

answer

reduced taxes and increased government spending

question

(Last Word) Say's law and classical macroeconomics were disputed by:

answer

John Maynard Keynes

question

(Last Word) Classical macroeconomics was dealt severe blows by:

answer

the Great Depression and Keyne's macroeconomic theory

question

(Last Word) In The General Theory of Employment, Interest, and Money:

answer

John Maynard Keynes attacked the classical economist's contention that recession or depression will automatically cure itself

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