Chapter 11 – The Aggregate Expenditures Model
(Advanced analysis) Answer the question on the basis of the following information for a
mixed open economy. The letters Y, Ca, Ig, Xn, G, and T stand for GDP, consumption, gross
investment, net exports, government purchases, and net taxes respectively. Figures are in
billions of dollars.
146. Refer to the above information. The equilibrium level of GDP for this economy is:
147. Refer to the above information. The multiplier for this economy is:
Chapter 11 – The Aggregate Expenditures Model
148. Refer to the above information. If government desired to raise the equilibrium GDP to
$650, it could:
149. Refer to the above information. If the economy’s tax schedule was T = 0.2Y rather than T
= T0 = 30, the equilibrium GDP would be:
Chapter 11 – The Aggregate Expenditures Model
151. Which of the following would reduce GDP by the greatest amount?
152. What do investment and government expenditures have in common?
153. Taxes represent:
Chapter 11 – The Aggregate Expenditures Model
The following information is for a closed economy:
154. Refer to the above information. If both government spending and taxes are zero, the
equilibrium level of GDP is:
155. Refer to the above information. If government now spends $80 billion at each level of
GDP and taxes remain at zero, the equilibrium GDP:
Chapter 11 – The Aggregate Expenditures Model
156. Refer to the above information. The introduction of $80 billion of government spending
157. Refer to the above information. If government spends $80 billion at each level of GDP,
and imposes a lump-sum tax of $100:
158. Refer to the above information. The addition of a $100 billion lump-sum tax:
Chapter 11 – The Aggregate Expenditures Model
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159. In moving from a private closed to a mixed closed economy in the aggregate
expenditures model, taxes:
160. Suppose government finds it can increase the equilibrium real GDP $45 billion by
increasing government purchases by $18 billion. On the basis of this information we can say
that the:
Answer the question on the basis of the following table:
Chapter 11 – The Aggregate Expenditures Model
161. The tax in the above economy is a:
162. The MPC and MPS in the above economy:
163. Refer to the above table. If an additional lump-sum tax of $20 were imposed, we would
expect:
Chapter 11 – The Aggregate Expenditures Model
164. In a mixed open economy, which of the following will affect the equilibrium GDP in the
same direction?
165. In the aggregate expenditures model, a reduction in taxes may:
166. In the aggregate expenditures model, an increase in government spending may:
Chapter 11 – The Aggregate Expenditures Model
167. If a $20 billion increase in government expenditures increases equilibrium GDP by $50
billion then:
168. If a $10 billion decrease in lump-sum taxes increases equilibrium GDP by $40 billion
then:
169. A lump-sum tax means that:
Chapter 11 – The Aggregate Expenditures Model
170. In an aggregate expenditures diagram, a lump-sum tax (T) will:
171. The effect of imposing a lump-sum tax is to:
172. Suppose that unintended increases in inventories are occurring in a mixed closed
economy. We can surmise that:
Chapter 11 – The Aggregate Expenditures Model
173. If a lump-sum tax of $40 billion is imposed and the MPC is 0.6, the saving schedule will
shift:
174. If the MPC in an economy is .75, a $1 billion increase in taxes will ultimately reduce
consumption by:
175. If the MPC in an economy is .9, a $1 billion increase in government spending will
ultimately increase consumption by:
Chapter 11 – The Aggregate Expenditures Model
176. If the marginal propensity to save in a closed economy is 0.25 and a lump-sum tax is
imposed, the slope of the economy’s aggregate expenditures schedule will be:
177. If the marginal propensity to consume in an economy is 0.8, net exports are zero, and
government spending is $33 billion at each level of real GDP, the slope of the economy’s
aggregate expenditures schedule will be:
178. If MPC = .5, a simultaneous increase in both taxes and government spending of $20
will:
Chapter 11 – The Aggregate Expenditures Model
179. If government increases its purchases by $15 billion and the MPC is 2/3, then we would
expect the equilibrium GDP to:
180. If government increases its tax revenues by $15 billion and the MPC is 2/3, then we can
expect the equilibrium GDP to:
181. It is true that:
Chapter 11 – The Aggregate Expenditures Model
182. In an aggregate expenditures diagram equal increases in government spending and in
lump-sum taxes will:
183. Equal increases in government purchases and taxes will:
Chapter 11 – The Aggregate Expenditures Model
184. Assume in a private closed economy that the equilibrium level of income is $380 and the
MPS is 0.25. Now suppose government collects taxes of $50 and spends the entire amount.
As a result:
185. An inflationary expenditure gap is the amount by which:
186. A recessionary expenditure gap is:
Chapter 11 – The Aggregate Expenditures Model
187. Refer to the above table. The economy shown is a:
188. Refer to the above table. The after-tax MPC in the economy shown is: