ECON 201 Lecture 10: Keynesian Economics, Tax multipliers (Part 2)

59 views3 pages

Verified Note

sapphiretiger55

27 Sep 2018

School

University of Maryland

Department

Economics

Course

ECON 201

Professor

John Neri

For unlimited access to Class Notes, a Class+ subscription is required.

ECON 201 verified notes

10/30View all

ECON 201 Lecture Notes - Lecture 9: Fixed Price, Consumption Function, Disposable And Discretionary Income

ECON 201 Lecture 10: Keynesian Economics, Tax multipliers (Part 2)

ECON 201 Lecture Notes - Lecture 11: Fiscal Multiplier

Document Summary

Econ201 lecture 10: keynesian economics, tax multipliers (part 2) Planned aggregate expenditure is planned consumption (c) plus planned investment (i) plus planned government expenditure (g) plus planned exports (x) minus planned imports (m) or c+i+g+x-m. C and m measured by real gdp (y) We will assume for simplicity that i, g, and x are not influenced by real gdp. Planned aggregate expenditure real gdp at a fixed price. The relationship between aggregate planned expenditure and real gdp can be described via a schedule. This schedule lists the level of aggregate expenditure planned at each level of real gdp. This is also known as the aggregate expenditure curve. This curve is a graphical representation of the aggregate expenditure table. Explains how aggregate expenditure curve is built from its components (neri 11) Short run model: real gdp with a fixed price level. Consumption c and imports m which change as a result f a change y (real gdp) are called induced expenditures.

Related Questions

Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.

C = 0.8(DI) + 1000	C = Consumption expenditure, DI = Disposable Income
I = 2000	I = Investment expenditure
G = 1000	G = government expenditure
X = 1600	X = spending on exports
M = 1800	M = spending on imports
DI = Y - T	Y = real GDP, T = tax revenues/>
T = 1000
Yp = 12000	Yp = Potential GDP

Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.

	a.	inflationary gap
	b.	recessionary gap
	c.	no output gap
	d.	government budget surplus
	e.	government budget deficit
	f.	balanced government budget
	g.	trade deficit
	h.	trade surplus
	i.	net exports of zero

pucearmadillo585

In the AD-AS model, stagflation does not persist, because the working of the self-correcting mechanism of the economy _____ the level of output and _____ the price level until the economy eventually returns to a long-run equilibrium state, where actual output _____ potential output.

	decreases; decreases; falls short of
	increases; decreases; equals
	decreases; increases; exceeds
	decreases; increases; equals
	increases; decreases; exceeds

The LRAS curve is drawn as a vertical line at potential output (Y*) to indicate that

	Y* is independent of the price level and that actual output Y > Y* in the long run
	Y* equals actual output (Y) in the long run
	Y* is independent of the price level and that actual output Y = Y* in the long run
	Y* is independent of the price level
	Y* is independent of the price level and that actual output Y < Y* in the long run

Stagflation arises in the context of the AD-AS model when some external factor causes

	the LRAS curve to shift to the right
	the AD curve to shift leftwards
	the SRAS curve to shift downwards
	the SRAS curve to shift upwards
	the AD curve to shift rightwards

If the SRAS curve is positively sloped, then a decrease in the demand for Canadian-made goods in Europe will lead to _____ in the price level, in the short run.

	either an increase or a decrease
	no change
	an increase
	a decrease
	an initial increase, and then a decrease

Which of the following will shift the aggregate demand curve to the right?

	Consumers become pessimistic about the future
	A new technology is developed that will increase profits
	Income taxes are raised
	Foreign economies fall into recession, reducing their demand for domestic exports
	The government reduces purchases to balance the budget

Suppose a stock market crash decreases the stock of household wealth and therefore causes autonomous consumption to fall. Which of the following is the likely result?

	A leftward shift the AD curve
	There will be no movement of the AD curve
	A movement down the AD curve
	A movement up the AD curve
	A rightward of the shift the AD curve

An economy is characterized by the AD equation P = 200 ? 0.02Y, SRAS equation P = 100 and LRAS equation Y* = 5000. In the absence of any change in policy or exogenous shocks, this economy will achieve a long-run price level of

	100
	110
	120
	90
	105

The AD-AS model depicts a self-correcting economy. This means that the price level in the model adjusts automatically in response to a(n) _____ gap, so as to eliminate the _____ gap in the long run, without requiring any help from government policies.

	recessionary; recessionary
	recessionary; expansionary
	expansionary; expansionary
	output; output
	expansionary; recessionary

The aggregate demand curve shows

	the amount of planned aggregate expenditure (and output) at the current price level
	the amount of planned aggregate expenditure (and output) at an average price level
	the amount of planned aggregate expenditure (and output) at a constant price level
	the amount of planned aggregate expenditure (and output) at various price levels
	the amount of planned aggregate expenditure (and output) at last year's price level

Consider an economy initially at long-run equilibrium with output (Y) equal to potential output (Y*). If the SRAS is positively sloped, then a shift to the right of the AD curve will lead to _____ in the price level, in the short run. In the long run, the SRAS curve will shift to the _____ and the equilibrium will be at __________.

	an increase; left; Y = Y*
	a decrease; right; Y > Y*
	an increase; right; Y = Y*
	a decrease; left; Y > Y*
	no change; left; Y = Y*

48. In order to be classified officially as unemployed, a personmust
a. Be out of work and available for work, need not be activelylooking for work
b. Be out of work, actively looking for work, and currentlyavailable for work
c. Only be out of work
d. Have been out of work for over 3 months

49. If exports rise and imports fall, (ceteris paribus)
a. Aggregate expenditure falls
b. Aggregate expenditure rises
c. Aggregate expenditure remains the same
d. Net exports are irrelevant when considering aggregateexpenditure

50. Over the past 25 years, the U.S. has had a net trade____________; which means
the U.S. has exported _________ it has imported.
a..Deficit; less than
b. Balance; the same amount as
c. Deficit; more than
d. Surplus; more than

43. If our economy was experiencing inflation, which of thefollowing would move us
back toward macro equilibrium?
a. Lower Taxes
b. Increase Investment
c. Reduce Net Exports
d. Increase Consumer Spending

42. If our economy slumped into a recession, which of the followingwould help move us back toward macro equilibrium?:
a. Reduce Taxes
b. Reduce Investment
c. Reduce Net Exports
d. Reduce Government Purchases

34. Economists consider that we are at full employment whenthe
a. Officially reported unemployment rate is at the naturalunemployment rate, about 5%
b. Natural unemployment rate is equal to 10 %.
c. Officially reported unemployment rate is zero.
d. Natural unemployment rate is equal to 0 percent.

35. Beginning at macro equilibrium, inflation occurs becauseaggregate
a. supply increases more rapidly than aggregate demand.
b. supply and aggregate demand increase at the same rate.
d. supply and aggregate demand decrease at the same rate.
c. demand increases more rapidly than aggregate supply.

36. If the U.S. government decreases significantly its expenditureon defense, then, ceteris paribus, the aggregate
a. demand curve shifts rightward.
b. demand curve shifts leftward.
c. supply curve shifts rightward.
d. supply curve shifts leftward.

37. According to Keynesian economics, which of the following ismost likely to raise the unemployment rate?
a. Aggregate demand increases.
b. Aggregate demand decreases.
c. Aggregate supply increases.
d. None of the above is likely to raise the unemploymentrate.

38. If a government has a budget deficit, it must
a. raise the real interest rate.
b. borrow in the financial market.
c. decrease taxes.
d. Increase spending

39. The U.S. gross public debt is approximately ________________which is
approximately ______________ % of U.S. GDP.

40. Under the U.S. Constitution, the ultimate power for determiningfiscal policy is:
e. The President
f. The Congress
g. The Council of Economic Advisors
h. The State governments

32. The Marginal Propensity to Consume (MPC) is:
e. The rate at which consumption changes over time
f. The percentage of an additional dollar of disposable income thatwill go toward additional consumption
g. The average percentage of total income one consumes
h. The average percentage of total income one saves

ECON 201 Lecture 10: Keynesian Economics, Tax multipliers (Part 2)

ECON 201 Lecture Notes - Lecture 9: Fixed Price, Consumption Function, Disposable And Discretionary Income

ECON 201 Lecture 10: Keynesian Economics, Tax multipliers (Part 2)

ECON 201 Lecture Notes - Lecture 11: Fiscal Multiplier

Document Summary

Get access

Related Documents

ECON 201 Lecture Notes - Lecture 11: Fiscal Multiplier

ECON 201 Lecture Notes - Lecture 4: Income Approach, Discouraged Worker, Business Cycle

ECON 201 Lecture Notes - Lecture 10: Aggregate Demand, Demand Curve, Canon Eos C300

Related Questions