Suppose consumption is described by C=a+b(Y-T), planned investment is I, and planned governmen spending and taxes are G and T, respectively. Keeping taxes constant, by how much should the government increase its spending G if it wants to increase equilibrium income by X in the Keynesian cross model? O a. (1-b)X O b. X/(1-b)
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- In a model with a constant price level and demand- determined output, the multiplier is larger, the... a. Lower the APC. O b. Lower the level of autonomous expenditures. O c. Higher the level of autonomous expenditures. O d. Flatter is the AE function. O e. Steeper is the AE function.Which of the following policies will NOT shift the Aggregate Expenditure curve upward? Select one: O a. increasing autonomous taxes O b. decreasing autonomous taxes O c. increasing autonomous transfer payments O d. increasing government expenditures on goods and servicesWhich of the following statements is true according to Keynesian economic theory? O If the government increases spending by $10 million, the aggregate demand will eventually increase by $10 million. O If the government increases spending by $10 million, the aggregate demand will eventually decrease by $10 million. O If the government increases spending by $10 million, the aggregate demand will eventually decrease by more than $10 million. If the government increases spending by $10 million, the aggregate demand will eventually increase by more than $10 million.
- Following the Keynesian cross, if there is a sudden tidal wave of investment, then it must be true that: a. Total output will not change at all in the short run because of the crowding out effect. O b. The planned expenditure line becomes steeper than the 45-degree line. Planned spending will be larger than income at the existing output level; inventories will be depleted fast, and producers must step up production. O d. The planned expenditure line becomes steeper than the 45-degree line.Consider a closed economy where investment is constant and the marginal propensity to consume is 0.8. In that economy, the government decides to increase its expenditures. Why is the associated Keynesian multiplier greater than 1? Select one: а. Because the production increase leads to a revenue increase which leads to a demand increase which leads to a consumption increase which leads to further increases in production, demand and consumption O b. Because the demand increase leads to a consumption increase which leads to a GDP increase which leads to a supply increase which leads to further increases in consumption, revenue and supply O c. Because the demand increase leads to a supply increase which leads to a revenue increase which leads to a consumption increase which leads to further increases in demand, supply and GDP O d. Because the production increase leads to a demand increase which leads to a supply increase which leads to a revenue increase which leads to further increases…An increase in the value of the simple multiplier can be caused by... O a. An increase in the net tax rate. O b. A decrease in the net tax rate. O c. An increase in the marginal propensity to save. O d. A decrease in the marginal propensity to consume. O e. An increase in the marginal propensity to import. Clear my choice
- An increase in interest rates shifts the Investment Demand curve up and increases Business Investment Expenditures. O True O False Households' autonomous savings is exactly the same as autonomous consumption. O True O False An increase in households' wealth will increase the marginal propensity to consume. O True O False Private-Sector Savings equal Consumption Expenditures at the Break-Even Disposable Income. True O False In National Income Accounting, an increase in unplanned inventory increases actual business investment expenditures (la). O True O FalseLook at Figure 3. Assume this aggregate demand diagram represents an economy with government, where: a = exogenous consumption b = the marginal propensity to consume t = the tax rate |= investment G = government spending Y = income Figure 3 Aggregate AD, demand AD, 45° Income Select the option that describes a possible scenario shown by the shift from AD, to AD, in Figure 3. Select one: O Rise in tax rate and rise in government spending. O Rise in tax rate and fall in government spending. O Fall in tax rate and fall in government spending. O Fall in tax rate and rise in government spending. ( Previous page Next page > PHILIPS19. Which of the following statements concerning Keynesian analysis are true? Select one: a. Keynes's analysis started with the recognition that the total quantity demanded of an economy's output was the sum of three types of spending: consumer expenditure, planned investment spending, and government spending. Ob. Keynes recognized that equilibrium would occur in the economy when planned expenditure equals Actual expenditure O c All of the above are true. d. Keynes's analysis involves explaining why aggregate output is at a certain level by understanding what factors affect each component of aggregate demand and how the sum of these components could add up to an output smaller or greater than the economy is capable of producing
- in a closed economy with no government, where aggregate demand is determinedby autonomous consumption, investment (which is independent of output), and themarginal propensity to consume.a) Given that autonomous consumption is 20, investment is also 20, and the marginalpropensity to consume is 0.6, write out an equation for aggregate demand (AD) in thiseconomy. b) Given this aggregate demand equation, and the equilibrium equation Y = AD, usealgebra to find the equilibrium level of Y. c) Draw a diagram with output (Y) on the x-axis and aggregate demand (AD) on the yaxis. Draw two lines on this diagram: (i) Y = AD, and (ii) the aggregate demandfunction from part (a). Label the intercept of the AD line, and the point where the twolines intersect, with numerical values. (3 marks)d) Suppose that the marginal propensity to consume falls from 0.6 to 0.5. What wouldthe new equilibrium level of Y be? Illustrate your answer in the diagram you drew forpart (c). (2 marks)e) Calculate the value of…Which of the following statements is true? O If aggregate expenditures exceed real GDP, the economy will expand, causing production of goods and services to increase and unplanned inventories to rise. O Once macroeconomic equilibrium has been established in an economy, there is no tendency for real GDP to change, even if there is change in autonomous expenditure. O A horizontal aggregate supply curve indicates that equilibrium real GDP is determined by aggregate supply. O If the actual unemployment rate is 8 percent, and the natural rate of unemployment is 6 percent, then the economy is producing a level of Real GDP that is lėss than the level of potential Real GDP.In a Keynesian cross diagram, if the marginal propensity to save increases, O a) the aggregate expenditure function will shift to the right, but its slope will not change b) the aggregate expenditure function will shift to the left, but its slope will not change O c) the slope of the aggregate expenditure function will increase O d) the slope of the aggregate expenditure function will decrease