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Exam 15: Income and Expenditures Equilibrium

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Question 51

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The multiplier effect of a change in foreign autonomous expenditures in the U.S.:

A) is zero because the U.S.is a closed economy.
B) is large because the United States imports a significant amount of foreign goods and services.
C) is large because the United States exports domestic products to every part of the world.
D) is small because the U.S.economy is too large to be significantly affected by foreign aggregate expenditures.
E) is small because U.S.foreign trade is not large enough to be counted as part of domestic GDP.

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Question 52

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Wealth is considered to be a nonincome determinant of consumption.

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Question 53

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The equilibrium level of income will rise when:

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure: S₁ and S₂: Saving functions I: Investment G: Government spending EX: Net exports In Figure 10.3, which of the following represents the paradox of thrift?

Consider a closed economy described by AE (aggregate expenditures) = 800, 000 + 0.75Y Assume that this economy is initially in equilibrium.But now the government implements a program to improve highways that will cost $1 million.This implies that equilibrium real GDP will:

The figure given below depicts macroeconomic equilibrium in a closed economy.Assume that the spending multiplier in this economy is 1.5. Figure 10.5 Refer to Figure 10.5.Assume that there is a recessionary gap that can be closed by a $500 increase in planned aggregate expenditures.If the economy is initially in equilibrium with a real GDP level of $900, then the target or potential level of real GDP must be:

The figure given below represents the leakages and injections of an economy. Figure 10.6 In Figure 10.6, the economy is in equilibrium at point _____.

If aggregate expenditures are less than real GDP, then:

The Keynesian aggregate expenditures model assumes that price level is constant.

If 81 percent of Canada's exports go to the United States, a recession in the United States would probably:

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure: S₁ and S₂: Saving functions I: Investment G: Government spending EX: Net exports Refer to Figure 10.3.If saving is represented by S₁, at a real GDP level of $500:

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3 According to the information provided in Table 10.3, the MPI equals _____.

If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise.

The figure given below shows the macroeconomic equilibrium of a country. Figure 10.7 Given a potential GDP level of $3, 000, the recessionary gap in Figure 10.7 equals _____.

Other things equal, a reduction in personal income taxes will decrease consumption and will have an expansionary effect on real GDP.

If a country's imports are very important in determining the volume of exports from its trading partners, then:

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years. Table 10.3 Refer to Table 10.3.The change in investment spending from year 1 to year 2 is:

The figure given below represents the leakages and injections in an economy. Figure 10.2 In the figure: I, I₁: Investment; G: Government spending; EX, EX₁: Exports; T: Taxes;and M: Imports. Refer to Figure 10.2.Suppose that I+G+EX equals $20 and the economy is in equilibrium.What is the amount of saving when T = $0 and M = $5 at the equilibrium level?

The aggregate demand curve depicts a negative relationship between real GDP and the general price level.

Ceteris paribus, a downward shift in the net exports function will cause: