Question

If autonomous consumption is $1000, the MPC = 0.75, net taxes = $500, investment spending =...

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
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Homework Answers

Answer #2

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**

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