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macro quiz 12

quiz 12 study flashcards

QuestionAnswer
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.
Created by: carry
 

 



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