Learning Catalytic Questions – Macro Exam 2 – Flashcards

Unlock all answers in this set

Unlock answers
question
the Aggregate Expenditure model focuses on the ______ relationship between real spending and _________
answer
short-run; real GDP
question
The key idea of the Aggregate Expenditure model is that in any particular year, the level of GDP is determined mainly by ______________
answer
the level of aggregate expenditure
question
Aggregate expenditure includes spending on ___________
answer
Consumption+ Investment + Government+Net Exports
question
Inventories refer to ______________
answer
goods that have been produced but not yet sold
question
An unplanned increase in inventories results from ______________
answer
actual investment that is greater than planned investment
question
Macroeconomic equilibrium occurs when __________
answer
aggregate expenditure = GDP
question
When aggregate expenditure is less than GDP, which of the following is true?
answer
there was an unplanned increase in inventories
question
If aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium?
answer
Inventories will decline, and GDP and employment will rise
question
if aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
answer
Inventories will rise, and GDP and employment will decline
question
Which is the largest component of aggregate expenditure?
answer
consumption expenditures
question
Consumption spending will ___________ when disposable income ____________
answer
increase; increases
question
The marginal propensity to consume is defined as ____________
answer
the change in consumption divided by the change in the disposable income
question
The marginal propensity to save is defined as __________
answer
the change in saving divided by the change in disposable income
question
The sum of marginal propensity to consume and the marginal propensity to save is always equal to _________
answer
1
question
If disposable income increases by $500 million, and consumption increases by $400 million, then the marginal propensity to consume is ______
answer
.8
question
If the MPC is 0.95, then a $10 million increase in disposable income will ____________
answer
increase consumption by $9.5 million
question
If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will _________
answer
decrease consumption by 7,5000
question
If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?
answer
net exports will decrease as U.S. exports decrease
question
Which of the following will decrease aggregate expenditure in the United States?
answer
a decrease in government purchases
question
If planned aggregate expenditure is greater than total production then
answer
firms will experience an unplanned decrease in inventories
question
Assume that inventories declined by more than analysts predicted. That implies that __________________
answer
planned aggregate expenditure was greater than real GDP
question
If an increase in investment spending of $50 million results in a $200 million increase in equilibrium, then
answer
the expenditure multiplier is 4
question
If an increase in government expenditure of $10 million results in a $50 million increase in equilibrium real GDP, then ____________
answer
the MPC is 0.8
question
All of the following are true statements about the multiplier EXCEPT
answer
the multiplier is a value between zero and one
question
Assume the economy is experiencing a $500 billion output gap. With a MPS of 0.2, how much would taxes have to change by to push the economy back to full employment?
answer
-$125 billion
question
Assume that the economy is experiencing a $500 billion out gap. With a MPC of 0.80, how much would government expenditures have to change by to push the economy back to full employment?
answer
$100 billion
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New