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Exam 22: Spending, Output, and Fiscal Policy

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Question 51

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Autonomous expenditure is the portion of planned aggregate expenditure that:

A) equals aggregate output.
B) equals planned spending.
C) equals induced expenditure.
D) is independent of output.

E) C) and D)
F) B) and D)

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Question 52

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In Econland autonomous consumption equals 700,the marginal propensity to consume equals 0.80,net taxes are fixed at 50,planned investment is fixed at 100,government purchases are fixed at 100,and net exports are fixed at 40.The slope of the Expenditure Line is:

A) 0.20.
B) 0.80.
C) 0.90.
D) 0.99.

E) None of the above
F) B) and C)

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Question 53

Multiple Choice

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In the short-run Keynesian model,if the mpc equals 0.8,then to decrease planned aggregate spending by $30 billion at any output level,government spending must be decreased by ______ or net taxes must be increased by _____.

For an economy starting at potential output,an increase in autonomous expenditure in the short run results in a(n) :

In the basic Keynesian model,a decrease in government purchases:

Suppose that the owner of a local ice cream store,knowing that demand for ice cream is higher when the weather is warmer,always charges a price in cents for a scoop of ice cream that is equal to two times the current outdoor temperature,measured in Fahrenheit (so that if it is 90 degrees outside,the ice cream is $1.80 per scoop) .This type of behavior is ______.

House prices in the U.S.increased dramatically _____,and decreased dramatically ______.

The consumption function is relationship between consumption and:

In the short-run Keynesian model where the marginal propensity to consume is 0.75,to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption,taxes must be:

In the short-run Keynesian model where the marginal propensity to consume is 0.5,to offset a recessionary gap resulting from a $1 billion decrease in autonomous consumption,government purchases must be:

The four components of planned aggregate expenditure are:

In the basic Keynesian model,an increase in government purchases:

In the Keynesian model,consumption depends on:

Unplanned inventory investment equals zero when

Changes in autonomous consumption could be the result of:

In Macroland autonomous consumption equals 100,the marginal propensity to consume equals 0.75,net taxes are fixed at 40,planned investment is fixed at 50,government purchases are fixed at 150,and net exports are fixed at 20.The slope of the Expenditure Line is:

In the Keynesian model,a $1 billion increase in autonomous consumption leads to ______ in short-run equilibrium output.

The slope of the consumption function:

If short-run equilibrium output equals 20,000 and potential output (Y*) equals 25,000,then this economy has a(n) ______ gap that can be closed by _________.

If short-run equilibrium output equals 10,000,the income-expenditure multiplier equals 10,the mpc equals 0.9,and potential output (Y*) equals 9,000,then taxes must be increased by approximately ______ to eliminate any output gap.