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Chapter 11 - The Aggregate Expenditures Model
189. Refer to the above table. The after-tax MPS shown is:
190. Refer to the above table. The multiplier is:
191. Refer to the above table. Equilibrium GDP is:
Chapter 11 - The Aggregate Expenditures Model
192. Refer to the above table. If the full-employment real GDP is $100 the:
193. Refer to the above table. If the full-employment real GDP is $40 the:
194. Refer to the above table. If the full-employment real GDP is $70 the:
Chapter 11 - The Aggregate Expenditures Model
195. Refer to the above table. Exports might be ____ and imports ___.
196. Refer to the above table. An increase in net exports of $10 would:
197. Refer to the above table. A decrease in government purchases of $5 would:
Chapter 11 - The Aggregate Expenditures Model
198. Refer to the above diagram. If the full-employment level of GDP is B and aggregate
expenditures are at AE3, the:
Chapter 11 - The Aggregate Expenditures Model
199. Refer to the above diagram. If the full-employment level of GDP is B and aggregate
expenditures are at AE1, the:
200. Refer to the above diagram. If the full-employment level of GDP is B and aggregate
expenditures are at AE2, the:
201. Refer to the above diagram. The value of the multiplier for this economy is:
Chapter 11 - The Aggregate Expenditures Model
202. A recessionary expenditure gap exists if:
203. Assume the current equilibrium level of income is $200 billion as compared to the full-
employment income level of $240 billion. If the MPC is 0.625, what change in aggregate
expenditures is needed to achieve full employment?
204. If the MPS is .25 and the economy has a recessionary expenditure gap of $5 billion, then
equilibrium GDP is:
Chapter 11 - The Aggregate Expenditures Model
205. Which of the following statements concerning the equilibrium level of GDP is
incorrect?
206. If the economy is in equilibrium at $400 billion of GDP and the full-employment GDP is
$500 billion:
207. If an increase in aggregate expenditures results in no increase in real GDP we can
surmise that the:
Chapter 11 - The Aggregate Expenditures Model
208. If the MPC is .50 and the equilibrium GDP is $40 billion below the full-employment
GDP, then the size of the recessionary expenditure gap is:
209. The recessionary expenditure gap associated with the recession of 2007-2009 resulted
from:
210. In an effort to stop the U.S. recession of 2007-2009, the Federal government:
Chapter 11 - The Aggregate Expenditures Model
211. The U.S. recession of 2007-2009 provides a good example of:
212. Viewed through the aggregate expenditures model, the U.S. recession of 2007-2009
resulted mainly from:
213. (Last Word) Say's law and classical macroeconomics were disputed by:
Chapter 11 - The Aggregate Expenditures Model
214. (Last Word) Classical macroeconomics was dealt severe blows by:
215. (Last Word) In The General Theory of Employment, Interest, and Money:
216. Graphically, the height of the investment schedule depends on the real interest rate,
together with the location of the investment demand curve.
Chapter 11 - The Aggregate Expenditures Model
11-87
217. In the aggregate expenditure model presented in the textbook, investment is assumed to
rise with increases in real GDP and fall with decreases in real GDP.
218. In the private closed economy, equilibrium GDP occurs where C + Ig = GDP.
219. When C + Ig = GDP in a private closed economy, S = Ig and there are no unplanned
changes in inventories.
220. If C + Ig exceeds GDP in a private closed economy, GDP will decline.
Chapter 11 - The Aggregate Expenditures Model
221. If the MPC is .8 in a private closed economy, a $30 billion increase in planned
investment will increase equilibrium real GDP by $120 billion.
222. Actual investment consists of planned investment plus unplanned changes in inventories
(plus or minus.)
223. A $20 billion decrease in investment in a private closed economy that has an MPS of .5
will reduce saving by $10 billion once the multiplier process has ended.
224. Exports are added to, and imports are subtracted from, aggregate expenditures in moving
from a closed to an open economy.
Chapter 11 - The Aggregate Expenditures Model
225. For an open mixed economy the equilibrium level of GDP is determined where Sa + Ig +
226. Equal increases in government expenditures and tax collections will leave the
equilibrium GDP unchanged.
227. A $10 billion decrease in taxes will increase the equilibrium GDP by more than would a
$10 billion increase in government expenditures.
Chapter 11 - The Aggregate Expenditures Model
228. A lump-sum tax causes the after-tax consumption schedule to be flatter than the before-
tax consumption schedule.
229. If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium
GDP will decrease by $100 billion.
230. If the MPC is .9, a $20 billion increase in a lump-sum tax will reduce GDP by $200
billion.
231. A recessionary expenditure gap in a mixed open economy can be measured as the extent
to which aggregate expenditures (Ca + Ig + Xn + G) fall short of real GDP at the full-
employment level of real GDP.
232. The recessionary expenditure gap is the amount by which the equilibrium GDP and the
full-employment GDP differ.
