Question

If autonomous consumption is $1000, the MPC = 0.75, net taxes = $500, investment spending = $800, and govt purchases = $500, and NX = $0, what is equilibrium GDP?

Question 1 options:

	$1,800
	$1,925
	$2,566.70
	$7,200
	$7,700

Question 2 (1 point)

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

Question 2 options:

	spending in explaining economic fluctuations
	labor in explaining economic fluctuations
	financial markets in explaining economic fluctuations
	output in explaining economic fluctuations
	resources in explaining economic fluctuations

Question 3 (1 point)

Which of the following is the definition of wealth?

Question 3 options:

	real disposable income
	the total value of assets
	real income
	the value of liabailities minus the value of assets
	the value of assets minus the value of liabilities

Question 4 (1 point)

Which of the following is the definition of wealth?

Question 4 options:

	0
	100
	180
	200
	1000

Question 5 (1 point)

Which of the following would lead to a decrease in autonomous consumption spending?

Question 5 options:

	a decrease in disposable income
	an increase in disposable income
	an increase in the interest rate
	more optimistic expectations about future income
	an increase in wealth

Question 6 (1 point)

What are the MPC and level of autonomous consumption spending for a consumption function of the following form: C = 1200 + 0.5*DI

Question 6 options:

	MPC = 0.5; autonomous consumption = $0.50
	MPC = 0.5; autonomous consumption = $1200
	MPC = 1200; autonomous consumption = $0.50
	MPC = 1200; autonomous consumption = $600
	none of the above are correct

Question 7 (1 point)

What is the difference between actual investment (as defined in GDP) and planned investment?

Question 7 options:

	Planned investment does not include unplanned inventory changes and actual investment does
	there is no difference betwee actual and planned investment
	planned investment does not include depreciation and actual investment does
	planned investment includes inventories and actual investment does not
	planned investment includes depreciation and acutal investment does not

Question 8 (1 point)

If aggregate expenditure exceeds GDP, we expect inventories to shrink and firms to increase production

Question 8 options:

	TRUE
	FALSE

Question 9 (1 point)

Suppose GDP is $4000 billion and aggregate expenditure is $3750 billion. Inventories will

Question 9 options:

	increase by $250 billion
	increase by $375 billion
	increase by $400 billion
	decrease by $250 billion
	decrease by $375 billion

Question 10 (1 point)

Suppose the economy is in equilibrium when firms decide to increase investment spending by $100 billion. According to the short-run macro model, what would be the effect on equilibrium real GDP?

Question 10 options:

	there would be no effect because the increased investment spending would be offset by decreased spending in other sectors
	it would increase by $100 billion
	it would increase by more than $100 billion
	it would increase by less than $100 billion
	it would decrease by $100 billion

Question 11 (1 point)

AE = 3000 + 0.75*RGDP. Given this equation for AE, describe inventories if RGDP = $8000

Question 11 options:

	decreasing by $9000
	increasing by $9000
	decreasing by $1000
	increasing by $1000

Question 12 (1 point)

AE = 3000 + 0.75*RGDP. Given this equation for AE, if government spending increases by $2000, find the new equilibrium GDP

Question 12 options:

	$8,000
	$4,000
	$14,667
	$20,000

Question 13 (1 point)

Which of the following will increase equilibrium GDP?

Question 13 options:

	increasing firm planned investment
	decreasing govt expenditures
	increasing imports
	all of the above will increase equilibrium GDP

Question 14 (1 point)

Saved

Disposable income is

Question 14 options:

	income minus saving
	income minus taxes plus transfers
	income plus transfers minus consumption expenditures
	total income divided by the price level

Answer 1

1. Ans - 7700

Explanation:

Equilibrium GDP is Y = C+ I + G + NX

C = 1000 + 0.75(Y-T) = 1000 + 0.75(Y-500)

Y = 1000 + 0.75(Y-500) + 800 + 500 + 0

Y - 0.75Y = 1925

0.25Y = 1925

Y = 7700

-----------------------

2. Ans - spending in explaining economic fluctuations

3. Ans - the value of assets minus the value of liabilities

4.*** - Question is wrong

5. Ans - An increase in the interest rate

Explanation:

An increase in the interest rate lead to increase the savings which leads to reduce autonomous consumption.

6. Ans - MPC = 0.5; autonomous consumption = $1200

7. Ans - Planned investment does not include unplanned inventory changes and actual investment does.

8. Ans - True

9. Ans - increase by $250 billion

10. Ans - it would increase by more than $100 billion

**Although we are only allowed to do first 4 questions, here i do 10 questions. Please post other questions separately**

answered by: anonymous