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macro quiz 12
quiz 12 study flashcards
Question | Answer |
---|---|
The aggregate expenditure model studies the relationship between: | total spending and real GDP. |
Which of the following statements is correct? | Actual investment will equal planned investment only when there is no unplanned change in inventories. |
When we say that the components of aggregate expenditure are measured in real terms, we mean that: | The values represent quantities only, not prices. |
The most important determinant of consumption is: | Current disposable income |
What is the impact of an increase in stock prices? | An increase in the consumption component of aggregate expenditure. |
If the marginal propensity to consume (MPC) is 0.9, how much additional consumption will result from an increase of $80 billion of disposable income? | $800 billion. |
Which of the following equalities is correct? | Disposable income = National income – Net taxes. |
When national income increases, there must be some combination of an increase in household: | Consumption and saving. |
The behavior of consumption and investment over time can be described as follows: | Consumption follows a smooth, upward trend, but investment is subject to significant fluctuations. |
Which of the following statements about investment spending is correct? | The optimism or pessimism of business firms is an important determinant of investment spending, A higher real interest rate results in less investment spending, and When the economy moves into a recession. |
Net exports have been __________ in most years between 1979 and 2009. Net exports have usually __________ when the U.S. economy is in recession and __________ when the U.S. economy is expanding. | negative; decreased; increased |
If inflation in the United States is lower than inflation in other countries, then U.S. exports ________ and U.S. imports ________, which _________ net exports. | increase; decrease; increases |
Find equilibrium GDP using the following macroeconomic model: C = 1000 + 0.75Y Consumption function I = 500 Investment function G = 600 Government spending function NX = −300 Net Export Function | 7200 |
As long as the AE line is above the aggregate expenditure equals actual output (Y = AE) line: | Inventories will decline and firms will expand production. |
When aggregate expenditure is greater than GDP: | Inventories will fall. |
When the economy is in a recession, the shortfall in aggregate expenditure is exactly equal to: | The unplanned increase in inventories. |
What is the multiplier | The multiplier is the ratio of the increase in equilibrium real GDP to the increase in autonomous expenditures. |
The value of the multiplier is larger when: | The value of the MPC is larger. |
A curve showing the relationship between the price level and the level of aggregate expenditure in the economy, holding constant all other factors that affect aggregate expenditure is called: | Aggregate demand. |