ECON102 Lecture Notes - Lecture 8: Aggregate Demand, Xm Satellite Radio, Disposable And Discretionary Income

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raspberrygnu289

8 Sep 2016

School

University of Waterloo

Department

Economics

Course

ECON102

Professor

Maryann Vaughan

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ECON102 Full Course Notes

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What makes up the aggregate expenditure or real gdp equation and the variables relationship with. Difference between planned aggregate expenditure and actual aggregate expenditure. Determining equilibrium expenditure and what steps to take to reach equilibrium. How do the autonomous variables effect real gdp or ae. How does import and income tax affect the multiplier. Keynesian model explains fluctuations in the short-run economy, when prices are fixed. We have seen in the classical view in the long-run the as is not dependent on price changes. When the government changes its economic and fiscal policies, the ad shifts and changes the price at the same output. Real gdp = income / aggregate expenditure = c + i + g + x - m. C and m are influenced by real gdp. So there is a two-way link between real gdp and aggregate expenditure. An increase in real gdp increases aggregate expenditure. An increase in aggregate expenditure increases real gdp.

Related Questions

Suppose that the Australian economy is at long run equilibrium, and the Australian government announces its decision to decrease spending on infrastructure.

Discuss the short-run effects of a decrease in spending on aggregate espenditure (AE) and aggregate demand (AD). in your discussion, explain the process that moves the economy to its new equilibrium output. That is, explain what would happen to:

1. aggregate planned expenditure

2. firms inventories and production

3. disposable income and consumption expenditure

4. aggregate demand and supply

5. real GDP and price level

Use the AE and AD Graph for your graphical analysis to support your explanation.

sapphiredinosaur980

10,A change in the price levelâ ________ the AE curve andâ ________ the AD curve.

âshifts; shifts

has no effectâ on; results in a movement along

results in a movementâ along; results in a movement along

results in a movementâ along; shifts

âshifts; results in a movement along

17,When the price levelâ falls, the aggregate planned expenditure curve shiftsâ ________, equilibrium expenditureâ ________ and there is a movementâ ________ along the aggregate demand curve.

âupward; increases; upward

âdownward; decreases; downward

âupward; decreases; downward

âupward; increases; downward

âdownward; increases; upward

21,Which of the following increases the size of the expenditureâ multiplier?

an increase in autonomous spending

a decrease in the marginal propensity to consume

a decrease in the marginal propensity to import

an increase in the marginal income tax rate

an increase in investment

23,If the quantity of real GDP demanded is greater than the quantity of real GDPâ supplied, then

the price level falls and firms decrease production.

aggregate demand changes to restore equilibrium.

the economy must be producing at potential GDP.

the price level falls to restore the macroeconomic equilibrium

the price level rises and firms increase production.

24, ________ can trigger an expansion.

Equality between aggregate expenditure and real GDP

A decrease in induced expenditure

A downward shift of the AE line

An increase in autonomous expenditure

A decrease in autonomous expenditure

greyarmadillo136

Question 1

Which of the following describes the relationship between the change in inventories and aggregate expenditure?

A.	Aggregate expenditure equals the change in inventories minus GDP.
B.	The change in inventories equals GDP divided by aggregate expenditures.
C.	Aggregate expenditures equals GDP divided by the change in inventories.
D.	Aggregate expenditures equals GDP minus the change in inventories.
E.	The change in inventories equals GDP multiplied by aggregate expenditure.

1 points

Question 2

Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?

A.	Disposable income and consumption fall by $10 billion
B.	Disposable income and consumption rise by $10 billion
C.	Disposable income rises by $10 billion and consumption rises by $8 billion
D.	Disposable income falls by $10 billion and consumption falls by $8 billion
E.	Disposable income rises by $10 billion and consumption falls by $8 billion

1 points

Question 3

If aggregate expenditure at a particular level of income is less than output,

A.	output will increase
B.	output will decrease
C.	output will remain the same
D.	output will rise slightly and then level off
E.	we cannot determine what will happen to output

1 points

Question 4

The consumption function

A.	illustrates the relationship between real disposable income and real consumption spending
B.	illustrates the relationship between the price level and real consumption spending
C.	is the relationship between productivity and real consumption spending
D.	shows how real consumption increases when real disposable income decreases
E.	illustrates the relationship between real consumption spending and employment

1 points

Question 5

The focus of the short-run macro model is on the role of

A.	spending in explaining economic fluctuations
B.	labor in explaining economic fluctuations
C.	financial markets in explaining economic fluctuations
D.	output in explaining economic fluctuations
E.	resources in explaining economic fluctuations.

1 points

Question 6

If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?

A.	Aggregate expenditure is greater than output, so inventories will increase and output will be raised.
B.	Aggregate expenditure is greater than output, so inventories will decrease and output will be increased.
C.	Aggregate expenditure is less than output, so inventories will decrease and output will be raised.
D.	Aggregate expenditure is less than output, so inventories will increase and output will be lowered.
E.	Aggregate expenditure is greater than output, so inventories will increase and output will be lowered.

1 points

Question 7

If the marginal propensity to consume is 0.7, the expenditure multiplier is

A.	7.0
B.	0.7
C.	3.0
D.	3.3
E.	not determinable without additional information.

1 points

Question 8

Aggregate expenditure is the sum of

A.	all types of spending by households and firms
B.	spending and savings by households
C.	spending by households and governments on final goods and services
D.	spending by households, government, firms, and foreigners on final goods and services
E.	all spending and saving by households, firms, and governments

1 points

Question 9

If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?

A.	$10,000
B.	$500
C.	$50
D.	$5,000
E.	$9,524

1 points

Question 10

When real consumption expenditure is plotted against real disposable income the resulting relationship is

A.	very weak.
B.	virtually flat .
C.	positive and very close to linear.
D.	negative and very close to linear.

indigognu668

ECON102 Lecture Notes - Lecture 8: Aggregate Demand, Xm Satellite Radio, Disposable And Discretionary Income

ECON102 Full Course Notes

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