ECON 2002.01 Lecture Notes - Lecture 19: Output Gap, Aggregate Demand, Aggregate Supply
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Multiple Choice (2 points each)
Identify the choice that best completes the statement or answers the question.
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____ 16. Government purchases, under the expenditure approach to GDP accounting, do not include:
a. |
state government purchases of plumbing services. |
b. |
Social Security benefit payments to retirees. |
c. |
the salaries of military officers. |
d. |
federal government purchases of computers. |
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____ 17. GDP equals $8 trillion. If consumption equals $5.5 trillion, investment equals $500 billion, and government spending equals $1.5 trillion, then:
a. |
exports exceed imports by $500 billion. |
b. |
imports exceed exports by $500 billion. |
c. |
net exports equal zero. |
d. |
exports exceed imports by $1 trillion. |
e. |
imports exceed exports by $1 trillion. |
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____ 18. If some non-price level determinant causes total spending to increase, then the effect on aggregate demand will be a:
a. |
movement upward along the curve. |
b. |
movement downward along the curve. |
c. |
shift to the left. |
d. |
shift to the right. |
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____ 19. An increase in the U.S. price level will:
a. |
increase U.S. exports. |
b. |
increase U.S. imports. |
c. |
increase RGDP demanded in the United States. |
d. |
both a. and c. |
e. |
both b. and c. |
Complete the following table:
Instructions: Enter your responses as whole numbers.
Ā | Ā | Ā | Real Output Demanded (in $ billions) by | Ā | ||||||
Price Level |
Consumers | + | Investors | + | Government | + | Net Exports | = | Aggregate Demand | Aggregate Supply |
120 | 80 | Ā | 15 | Ā | 20 | Ā | 10 | Ā | ? | 320 |
110 | 92 | Ā | 16 | Ā | 20 | Ā | 12 | Ā | ? | 260 |
100 | 104 | Ā | 17 | Ā | 20 | Ā | 14 | Ā | Ā | 215 |
90 | 116 | Ā | 18 | Ā | 20 | Ā | 16 | Ā | Ā | 200 |
80 | 128 | Ā | 19 | Ā | 20 | Ā | 18 | Ā | Ā | 185 |
70 | 140 | Ā | 20 | Ā | 20 | Ā | 20 | Ā | Ā | 175 |
60 | 154 | Ā | 21 | Ā | 20 | Ā | 22 | Ā | Ā | 170 |
(a) What is the level of equilibrium real GDP?
$ billion
(b) What is the equilibrium price level?
$
(c) If full employment occurs at a real GDP of $200 billion, what kind of GDP gap exists?
Ā | An inflationary GDP gap |
Ā | A recessionary GDP gap |
(d) How large is that gap?
Ā
(e) Which macroeconomic problem exists here?
Ā | Unemployment |
Ā | Inflation |