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Exam 10: Income and Expenditures Equilibrium

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Question 71

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The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports -Refer to Figure 10.3. If saving is represented by S₁, at a real GDP level of $500:

A) leakages are greater than injections which will cause income to increase.
B) leakages are greater than injections which will cause income to decrease.
C) leakages are less than injections which will cause income to increase.
D) leakages are less than injections which will cause income to decrease.
E) leakages are equal to injections which will cause no change in income.

F) None of the above
G) A) and C)

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Question 72

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The table given below shows the levels of national income (Y) and the corresponding levels of saving (S) , investment (I) , export (X) , and import (M) of an open economy.? -Consider the economy described in Table 10.2. Calculate the level of consumption spending when the economy is in equilibrium.

A) $4,425
B) $4,010
C) $4,050
D) $5,175
E) $4,800

F) B) and C)
G) A) and B)

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Question 73

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Which of the following is true at the equilibrium level of income?

The figure given below depicts macroeconomic equilibrium in a closed economy. Assume that the spending multiplier in this economy is 1.5.?Figure 10.5 -Refer to Figure 10.5. Suppose that the economy is characterized by an equilibrium real GDP level of $900 that exceeds the potential real GDP level by $600. This so-called expansionary gap can be closed by:

The table given below reports the value of real GDP and its components consumption (C) , investment (I) , exports, and imports for two consecutive years in an economy.? -Refer to Table 10.3. The change in investment spending from year 1 to year 2 is:

If an economy consumes 75 percent of any increase in real GDP and spends 10 percent of this increased income on imports, then a decline in government spending by $60 million will result in a total reduction in equilibrium income of:

Scenario 10.2?A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. -Refer to Scenario 10.2. What will happen to the equilibrium real GDP if a tourist visits the country and spends $100 that she brought with her?

The aggregate demand curve depicts a negative relationship between real GDP and the general price level.

Which of the following can be considered an injection into an economy?

The aggregate demand curve shows:

A marginal propensity to consume of 0.75 and a marginal propensity to import of 0.05 are associated with an open-economy spending multiplier of 3.33.

If the MPS equals 0.25 and the MPI is 0.15, then an initial change in investment spending of $250 million will result in a total change in equilibrium real GDP of $625 million.

The table given below shows the levels of national income (Y) and the corresponding levels of saving (S) , investment (I) , export (X) , and import (M) of an open economy.? -Consider the economy described in Table 10.2. Calculate the value of leakages from the economy when the economy is in equilibrium.

Suppose the marginal propensity to consume is 0.63, the marginal propensity to import equals 0.08, and personal income taxes amount to 9 percent of GDP. The spending multiplier for this economy is equal to _____.