EC120 Chapter Notes - Chapter 27: Chapter 27, Autonomous Consumption, Disposable And Discretionary Income
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EC120 Full Course Notes
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Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.
C = 0.8(DI) + 1000 | C = Consumption expenditure, DI = Disposable Income |
I = 2000 | I = Investment expenditure |
G = 1000 | G = government expenditure |
X = 1600 | X = spending on exports |
M = 1800 | M = spending on imports |
DI = Y - T | Y = real GDP, T = tax revenues/> |
T = 1000 | |
Yp = 12000 | Yp = Potential GDP |
Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.
a. |
inflationary gap |
|
b. |
recessionary gap |
|
c. |
no output gap |
|
d. |
government budget surplus |
|
e. |
government budget deficit |
|
f. |
balanced government budget |
|
g. |
trade deficit |
|
h. |
trade surplus |
|
i. |
net exports of zero |
6. To study the macroeconomy we must combined prices and quantities generated in single-product markets into broad aggregates.
a) | True |
b) | False |
7. An economist who favored expanded government would recommend:
a) | tax cuts during recession and tax increases during inflation |
b) | tax increases during recession and tax cuts during inflation. |
c) | tax cuts during both recession and inflation |
d) | increases in government spending during a recession and tax increases during inflation. |
e) | tax cuts during recessions and reduction in government spending during inflation. |
8. If Government tax revenue exceeds Government spending the result of the budget is
a) | an increase in investment |
b) | a shortage |
c) | an increase in the deficit |
d) | a decrease in savings |
e) | a surplus |
9. Which of the following statements is true?
a) | In the US economy, the net export sector is positive. |
b) | Aggregate demand is the sum of total output produced by all firms in the US. |
c) | The aggregate supply curve is vertical if the price level is equal to the per-unit cost of production |
d) | Aggregate production sums up the four major components C+I+G+Xn in the US economy. |
e) | Government spending is the largest component of aggregate demand. |
10. Which of the following statements is true?
a) When unemployment is rising then real GDP is rising. | |
b) | The required reserve ratio is a tool used by the government to control the demand for money. |
c) | The four components of aggregate supply are the same as aggregate demand. |
d) | when an imported resource such as oil has decreased that is an increase in aggregate demand. |
e) | The four components of aggregate demand---Households, Business, Government, and Net Exports. |