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Exam 11: Expenditure Multipliers

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Question 21

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Induced expenditure includes

A) induced consumption expenditure and government expenditure.
B) induced consumption expenditure and imports.
C) all autonomous expenditure.
D) induced consumption expenditure and exports.

E) A) and B)
F) A) and D)

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Question 22

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In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level ________ and real GDP ________ $3 million.

A) falls; decreases by less than
B) rises; equals
C) rises; increases by less than
D) rises; decreases by less than

E) A) and B)
F) All of the above

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Question 23

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The multiplier is the amount by which ________ is multiplied to determine ________.

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that ..."its clothing factories have been exposed to frontal competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..." www.ft.com, 3/13/2006 Suppose real GDP is $14 billion, exports total $2 billion and the multiplier is 4. If exports decline by $600,000,000, real GDP in Mauritius will

-The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton. a) Find aggregate planned expenditure for each level of real GDP. b) What is the equilibrium level of real GDP?

If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is

The MPC is the fraction of

-In the above figure, if real GDP is greater than $15 trillion, inventories will be

-In the above figure, induced expenditure is equal to $2 trillion at point

The size of the marginal propensity to consume

-In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports, and M is imports. All entries are in dollars. What is the marginal propensity to consume?

The Keynesian model of aggregate expenditure assumes that

What does the marginal propensity to consume measure and how is it related to the consumption function?

Actual aggregate expenditure does not always equal real GDP.

When disposable income equals $800 billion, planned consumption expenditure equals $600 billion, and when disposable income equals $1,000 billion, planned consumption expenditure equals $640 billion. What is planned saving when disposable income is $800 billion?

In the very short term, planned investment ________ when GDP changes and planned consumption expenditure ________ when GDP changes.

At a level of disposable income of $0, consumption expenditure is $3,500. Therefore when disposable income is $0

-Based on the figure above, the marginal propensity to consume is

Given an MPC of 0.80, if there are no income taxes or imports and prices are constant, then when investment increases by $50 million and prices are fixed, equilibrium GDP would

List the components of aggregate expenditure and describe how each of them change as real GDP increases.