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Exam 11: Spending, Output, and Fiscal Policy

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Question 41

Multiple Choice

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Changes in government purchases affect planned spending _____, and changes in taxes and/or transfers affect planned spending _______.

A) directly; directly
B) directly; indirectly
C) directly; not at all
D) indirectly; indirectly

E) A) and D)
F) A) and B)

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Question 42

Multiple Choice

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Refer to the figure below. Based on the figure, when PAE = 600 + 0.5Y, short-run equilibrium output equals:

A) 1,200.
B) 400.
C) 600.
D) 800.

E) None of the above
F) A) and D)

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Question 43

Multiple Choice

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If planned aggregate expenditure (PAE) in an economy equals 1,000 + 0.9Y and potential output (Y*) equals 9,000, then this economy has:

Refer to the figure below. Based on the figure, if autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal:

In the basic Keynesian model, a tax increase:

Suppose the stock market crashed, wiping out $5 trillion of household wealth.Consistent with economic models based on historical trends, consumption spending might fall by as much as, but probably not more than:

When real output decreases, planned aggregate expenditures decrease because:

A recession in the United States ______ the demand for exports from Canada resulting in a reduction in Canadian autonomous expenditures and a(n) ______ output gap in Canada.

Refer to the figure below.] Based on the figure, when PAE = 200 + 0.5Y, short-run equilibrium output equals:

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.Planned aggregate expenditure equals:

Government policies that are used to affect planned aggregate expenditure, with the objective of eliminating output gaps, are called ______ policies.

As disposable income increases, consumption:

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

A fiscal policy action to close an expansionary gap is to:

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 ______.

All of the following would be included in planned aggregate expenditure except:

If short-run equilibrium output equals 50,000 and potential output (Y*) equals 45,000, then this economy has a(n) ______ gap that can be closed by _________.

The largest component of planned aggregate expenditure is:

In the short run, with predetermined prices, when output is greater than planned aggregate expenditures:

As disposable income decreases, consumption: