The Aggregate expenditure

Flashcard maker : Lily Taylor
John meynard keynes created the aggregate demand expenditures model based primarily on what historic event
Great depression
The aggregate expenditure model is built upon which of the following assumptions
prices are fixed
A private closed economy includes
Households and business, but not government or international trade
In the aggregate expenditure model, it is assumed that invesment
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
Other thing equal , the slope of the aggregate expenditures schedule will increase as a result of
an increase in the MPC
In a private closed economy, when aggregate expenditures exceed GDP
planned investment equals savings
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
Assume that in a private closed economy consumption is 240 billion and investment is 50 billion, both at the 280 billion level of domestic output. THUS
unplanned decreases in inventories of 10 billion will occur
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 savings
For a private closed economy, and unintended decline in inventories suggest that
aggregate expenditures exceed production
When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate expenditures schedule
equal the MPC
Actual invesment 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.
.10
If unintended increases in business inventories occur, we can expect
a decline in GDP and rising unemployment
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
What will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources
a rise in the real GDP
Which of the following statements is correct for a private closed economy
Savings 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
Savings is always equal to
actual investment
Actual investment equals savings
at all levels of GDP
unintended changes in inventories
Bring actual investment and saving into equality at all levels of GDP
Investment and savings are, respectively
injections and leakages
If the marginal propensity to consume is .9 in a private closed economy, a 20 billion decline in investment spending will decrease
savings by 20
Imports have the same effect on the current size of GDP as
savings
Exports have the same effect on the current size of GDP as
Investment
At the equilibrium GDP for a private open economy
net exports may be either positive or negative
Other thing equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S GDP then
U.S real GDP will fall
If net exports decline from zero to some negative amount, the aggregate expenditures schedule would
shift downward
If net exports are positive
Aggregate expenditures are greater at each level of GDP than when net exports are zero or negative
An upward shift of the aggregate expenditures schedule might be caused by
A decrease in imports, with no change in exports
Other things equal, an increase in an economies exports will
Increase its domestic aggregate expenditures and therefore increases its equilibrium GDP
If the dollar appreciates relative to foreign currencies, we would expect
A countrys net exports to fall
If a nations imposes tariffs and quotas on foreign products, the immediate effect will be to
increase domestic output and employment
If the multiplier in an economy is 5, a 20 billion increase in net exports will
increase GDP by 100 billion
Imports have the same effect on the current size of GDP as
savings

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