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ECON 2010 Study Guide - Quiz Guide: Fiscal Multiplier, Disposable And Discretionary Income

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viridianpug644
2 Jul 2014
School
LSU
Department
Economics
Course
ECON 2010
Professor
All

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Document Summary

Multiplier effect- an increase in autonomous expenditures, the y intercept/independent variables ( c bar mpc*t + i + g +nx), will lead to a greater increase in y (gdp), such that, As the figure below shows, increasing the autonomous spending due to an increase in the government spending. This increase leads to a change in the y intercept and thus shifts the entire curve upward by the increase in autonomous spending/government spending. Increase in the y intercept= increase in autonomous spending= increase in government spending= change in autonomous spending. Next, we need to calculate the change in gdp by looking at the intersection points with pae=y. The curve labeled one represents the curve before the increase in government spending. The curve labeled one intersects pae=y at gpd1. The curve labeled two represents the curve after the government spending increases. The curve labeled two intersects pae=y at gdp2.

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Related Questions

10,A change in the price level​ ________ the AE curve and​ ________ the AD curve.
A.
​shifts; shifts
B.
has no effect​ on; results in a movement along
C.
results in a movement​ along; results in a movement along
D.
results in a movement​ along; shifts
E.
​shifts; results in a movement along

17,When the price level​ falls, the aggregate planned expenditure curve shifts​ ________, equilibrium expenditure​ ________ and there is a movement​ ________ along the aggregate demand curve.
A.
​upward; increases; upward
B.
​downward; decreases; downward
C.
​upward; decreases; downward
D.
​upward; increases; downward
E.
​downward; increases; upward

21,Which of the following increases the size of the expenditure​ multiplier?
A.
an increase in autonomous spending
B.
a decrease in the marginal propensity to consume
C.
a decrease in the marginal propensity to import
D.
an increase in the marginal income tax rate
E.
an increase in investment

23,If the quantity of real GDP demanded is greater than the quantity of real GDP​ supplied, then
A.
the price level falls and firms decrease production.
B.
aggregate demand changes to restore equilibrium.
C.
the economy must be producing at potential GDP.
D.
the price level falls to restore the macroeconomic equilibrium
E.
the price level rises and firms increase production.


24, ________ can trigger an expansion.
A.
Equality between aggregate expenditure and real GDP
B.
A decrease in induced expenditure
C.
A downward shift of the AE line
D.
An increase in autonomous expenditure
E.
A decrease in autonomous expenditure


1. In an economy with no foreign trade and a marginal propensity to consume of 0.8, which of the following will be true?

a. If taxes are increased by $100M, GDP will decrease by $500M.

b. If autonomous consumption increases by $50M, GDP will increase by $200M.

c. If both taxes and government spending increase by $100M, GDP will increase by $250M.

d. If taxes are decreased by $100M, GDP will increase by $400M.

e. If autonomous consumption decreases by $100M, GDP will decrease by $800M.

2. Looking at the circular flows model, how can the saving equals investment equation be derived?

a. By looking at flows into and out of goods markets

b. By looking at flows into and out of financial markets

c. By looking at flows into and out of households

d. By looking at flows into and out of firms

e. By looking at flows into and out of the government

3. What will be the short-run effect of a 10% increase in the money supply for an economy operating in the Keynesian portion of the aggregate supply curve?

a. Real GDP will increase by 10% if velocity doesn't change.

b. Real GDP and the price level will both increase by 5% if velocity doesn't change.

c. Real GDP won't change, but the price level will increase by 10% if velocity doesn't change.

d. Velocity will fall by 5%, the price level will increase by 5%, and real GDP won't change.

e. According to the quantity theory of money, velocity will fall by 10%, and nothing else will change

4. Which of the following will make monetary policy more effective in changing nominal GDP?

a. A fixed velocity of money

b. A flat investment demand curve

c. A high marginal propensity to save

d. A money demand curve that is very flat

e. An aggregate expenditure curve that is very flat

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.