AS.180.101 Chapter Notes - Chapter 12: Gross Domestic Product, Nominal Interest Rate, Disposable And Discretionary Income

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30 Aug 2016

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Textbook notes: chapter 12 (p. 370 394) Chapter 12: aggregate expenditure and output in the short run. We will explore causes of the business cycle and the effect of changes in total spending on real gross domestic product (gdp) Aggregate expenditure (ae)= total spending in the economy: the sum of consumption, planned investment, government purchases, and net exports. Some years: total spending (aggregate expenditure) and total production of goods increase by the same amount firms sell as much as they expected. Other years: total spending increases more than production of goods firms will increase production as a result of more spending and higher demand and will hire more workers. 2008 years: total spending does not increase as much as total production firms cut back on production and lay off workers! Aggregate expenditure: keynes identified 4 components of aggregate expenditure that together equal gdp (same 4 discussed in chapter 8), 1. Consumption (c): spending by households on goods/services (cars, haircuts: 2.

Related Questions

If aggregate expenditures fall short of real GDP in the Keynesian model, then

Question 2 options:

A) employment falls as the economy attains equilibrium.

B) the economy will have deflation.

C) firms are depleting their inventories.

D) the money supply will increase.

Which of the following conditions does not necessarily hold when the economy is in a Keynesian equilibrium?

Question 3 options:

A) There will be no tendency for real GDP to change.

B) The economy will be at full employment.

C) Firms will not have any unplanned inventory investment accumulation

D) Aggregate output will equal aggregate expenditures.

According to the Keynesian model, an economy will have persistent, high unemployment if

Question 4 options:

A) market operate freely.

B) the government runs a budget deficit.

C) firms make too many investments.

D) its total spending is low.

If firms are experiencing unplanned reductions in their inventories,

Question 5 options:

A) firms should reduce their production.

B) aggregate output exceeds aggregate expenditures.

C) firms will increase output and hire more workers.

D) the economy has attained equilibrium

amaranthelk637

In the Keynesian model

aggregate demand determines real GDP per year.

the short-run aggregate supply curve determines real GDP.

unemployment cannot persist for long periods of time.

the aggregate demand curve determines the price level.

A terrible winter storm causes enormous problems in the

northeastern

part of the United States. This would cause

the short-run aggregate supply curve to shift to the left, but would have no effect on the long-run aggregate supply curve.

both the short-run and the long-run aggregate supply curves to shift to the left, but the long-run aggregate supply curve would shift more than the short-run curve.

the short-run aggregate supply curve to shift to the left, and the long-run aggregate supply curve would shift to the right.

both the short-run and the long-run aggregate supply curves to shift to the right in equal amounts.

Equilibrium real GDP rises after the dollar strengthened. From this we can conclude that

the increase in aggregate demand was greater than the decrease in aggregate supply.

the decrease in aggregate demand was more than the increase in aggregate supply.

the decrease in aggregate demand was less than the increase in aggregate supply.

the increase in aggregate demand was less than the decrease in aggregate supply.

Saving is

the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending.

the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving.

the difference between disposable income and spending on goods and serviceswhile savings is the difference between real GDP and disposable income.

the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time.

A permanent reduction in investment spending leads to

a proportional decrease in real GDP.

a more than proportional decrease in real GDP.

a more than proportional increase in real GDP.

a less than proportional decrease in real GDP.

An increase in net exports leads to an increase in real GDP. Further,

consumption spending increases while investment spending decreases.

consumption spending increases but saving does not change.

consumption spending and saving increase.

government spending decreases to offset the increase in net exports.

An increase in aggregate spending that is caused by a factor other than the price level will lead to the

aggregate demand curve shifting to the right.

aggregate supply curve shifting to the right.

aggregate supply curve shifting to the left.

aggregate demand curve shifting to the left.

The marginal propensity to consume is 0.9. The multiplier is

0.9.

1.11.

0.1.

10.

When the SRAS curve slopes upward, the actual affect of an increase in real autonomous spending on equilibrium real GDP is smaller than predicted by the multiplier because

real GDP increases.

the price level rises

the price level falls.

real GDP decreases.

Other things equal, the lower the total real value of final goods and services demanded in the economy the

more the production possibilities cure shifts to the left.

lower the price level.

higher the price level.

lower the level of endowments.

The long-run aggregate supply curve can be thought of as the

level of output for which real GDP equals nominal GDP.

level of output that the nation is currently producing.

level of real GDP associated with a constant price level.

full-employment level of real GDP.