Reference no: EM13175734
1. Briefly define the following term:
a. Multiplier
2. For the following questions, assume that the price level does not change, that is, we are considering the short run.
a. Suppose the MPC equals 0.9. What does the multiplier equal?
b. Suppose the multiplier equals 4.0 and autonomous expenditure increases by $5 billion. What is the change in equilibrium expenditure?
c. Suppose the multiplier equals 10.0 and autonomous expenditure decreases by $30 billion. What is the change in equilibrium expenditure?
d. Suppose the MPC equals 0.5 and autonomous expenditure increases by $50 billion. What is the change in equilibrium expenditure?
3. In a diagram, draw an aggregate expenditure curve (the AE curve) and label it AE0. Label the axes. Indicate the equilibrium expenditure along the horizontal axis. Suppose that autonomous expenditure increases. Draw the new aggregate expenditure curve, label it AE1, and indicate the new equilibrium expenditure.
4. Why do income taxes and imports decrease the size of the multiplier?
Answer the following multiple choice questions.
5. The multiplier effect occurs because
a. changes in price levels affect people's willingness to invest, consume, import and export.
b. an autonomous change in expenditure creates an induced change in consumption expenditure.
c. of government stabilization policies.
d. of income taxes.
In an economy in which prices are constant and with no income taxes or imports, the marginal propensity to consume is 0.8. If exports increase $50, what impact will there be on aggregate expenditure?
a. increase by $250
b. increase by $100
c. decrease by $250
d. decrease by $100
7. In Figure 3, if AE0 is the aggregate expenditure curve, then equilibrium real GDP is
a. $6 trillion.
b. $12 trillion.
c. $18 trillion.
d. None of the above answers are correct
8. In Figure 3, the shift from AE0 to AE1 might have been the result of
a. an increase in autonomous expenditure.
b. a decrease in autonomous expenditure.
c. an increase in the price level.
d. All of the above answers are correct.
9. If the price level increases, the AE curve shifts
a. upward and the AD curve shifts leftward.
b. downward and the AD curve shifts rightward.
c. upward and there is a movement along the AD curve.
d. downward and there is a movement along the AD curve.
1. Briefly define the following term:
a. Multiplier
2. For the following questions, assume that the price level does not change, that is, we are considering the short run.
a. Suppose the MPC equals 0.9. What does the multiplier equal?
b. Suppose the multiplier equals 4.0 and autonomous expenditure increases by $5 billion. What is the change in equilibrium expenditure?
c. Suppose the multiplier equals 10.0 and autonomous expenditure decreases by $30 billion. What is the change in equilibrium expenditure?
d. Suppose the MPC equals 0.5 and autonomous expenditure increases by $50 billion. What is the change in equilibrium expenditure?
3. In a diagram, draw an aggregate expenditure curve (the AE curve) and label it AE0. Label the axes. Indicate the equilibrium expenditure along the horizontal axis. Suppose that autonomous expenditure increases. Draw the new aggregate expenditure curve, label it AE1, and indicate the new equilibrium expenditure.
4. Why do income taxes and imports decrease the size of the multiplier?
Answer the following multiple choice questions.
5. The multiplier effect occurs because
a. changes in price levels affect people's willingness to invest, consume, import and export.
b. an autonomous change in expenditure creates an induced change in consumption expenditure.
c. of government stabilization policies.
d. of income taxes.
In an economy in which prices are constant and with no income taxes or imports, the marginal propensity to consume is 0.8. If exports increase $50, what impact will there be on aggregate expenditure?
a. increase by $250
b. increase by $100
c. decrease by $250
d. decrease by $100
7. In Figure 3, if AE0 is the aggregate expenditure curve, then equilibrium real GDP is
a. $6 trillion.
b. $12 trillion.
c. $18 trillion.
d. None of the above answers are correct
8. In Figure 3, the shift from AE0 to AE1 might have been the result of
a. an increase in autonomous expenditure.
b. a decrease in autonomous expenditure.
c. an increase in the price level.
d. All of the above answers are correct.
9. If the price level increases, the AE curve shifts
a. upward and the AD curve shifts leftward.
b. downward and the AD curve shifts rightward.
c. upward and there is a movement along the AD curve.
d. downward and there is a movement along the AD curve.