ECN 101 Study Guide - Midterm Guide: Fiscal Multiplier, Money Supply

58 views2 pages

turquoisegnu128

9 Jan 2019

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Midterm 2 solutions - economics 101 - spring 2013: d, b, a, b, d, b, d, a, c, b, c, a, a, d, d, a, b, d, c, d, b. So output rises by 9*10 bil = 90 bil. The gov spending multiplier is (1/(1-0. 9)) = 10. So output falls by 10*10 bil = 100 bil. So on net, output fall by 10 bil. So output rises by 3*20 bil = 60 bil. The gov spending multiplier is (1/(1-0. 75)) = 4. So output falls by 4*20 bil = 80 bil. So on net, output fall by 20 bil. So output rises by 1*30 bil = 30 bil. The gov spending multiplier is (1/(1-0. 5)) = 2. So output falls by 2*30 bil = 60 bil. So on net, output fall by 30 bil. The fall in government spending lowers total expenditure and output for a given level of interest rate and price level.

Related Questions

Question 1

Which of the following describes the relationship between the change in inventories and aggregate expenditure?

A.	Aggregate expenditure equals the change in inventories minus GDP.
B.	The change in inventories equals GDP divided by aggregate expenditures.
C.	Aggregate expenditures equals GDP divided by the change in inventories.
D.	Aggregate expenditures equals GDP minus the change in inventories.
E.	The change in inventories equals GDP multiplied by aggregate expenditure.

1 points

Question 2

Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?

A.	Disposable income and consumption fall by $10 billion
B.	Disposable income and consumption rise by $10 billion
C.	Disposable income rises by $10 billion and consumption rises by $8 billion
D.	Disposable income falls by $10 billion and consumption falls by $8 billion
E.	Disposable income rises by $10 billion and consumption falls by $8 billion

1 points

Question 3

If aggregate expenditure at a particular level of income is less than output,

A.	output will increase
B.	output will decrease
C.	output will remain the same
D.	output will rise slightly and then level off
E.	we cannot determine what will happen to output

1 points

Question 4

The consumption function

A.	illustrates the relationship between real disposable income and real consumption spending
B.	illustrates the relationship between the price level and real consumption spending
C.	is the relationship between productivity and real consumption spending
D.	shows how real consumption increases when real disposable income decreases
E.	illustrates the relationship between real consumption spending and employment

1 points

Question 5

The focus of the short-run macro model is on the role of

A.	spending in explaining economic fluctuations
B.	labor in explaining economic fluctuations
C.	financial markets in explaining economic fluctuations
D.	output in explaining economic fluctuations
E.	resources in explaining economic fluctuations.

1 points

Question 6

If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?

A.	Aggregate expenditure is greater than output, so inventories will increase and output will be raised.
B.	Aggregate expenditure is greater than output, so inventories will decrease and output will be increased.
C.	Aggregate expenditure is less than output, so inventories will decrease and output will be raised.
D.	Aggregate expenditure is less than output, so inventories will increase and output will be lowered.
E.	Aggregate expenditure is greater than output, so inventories will increase and output will be lowered.

1 points

Question 7

If the marginal propensity to consume is 0.7, the expenditure multiplier is

A.	7.0
B.	0.7
C.	3.0
D.	3.3
E.	not determinable without additional information.

1 points

Question 8

Aggregate expenditure is the sum of

A.	all types of spending by households and firms
B.	spending and savings by households
C.	spending by households and governments on final goods and services
D.	spending by households, government, firms, and foreigners on final goods and services
E.	all spending and saving by households, firms, and governments

1 points

Question 9

If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?

A.	$10,000
B.	$500
C.	$50
D.	$5,000
E.	$9,524

1 points

Question 10

When real consumption expenditure is plotted against real disposable income the resulting relationship is

A.	very weak.
B.	virtually flat .
C.	positive and very close to linear.
D.	negative and very close to linear.

indigognu668

1. Suppose the multiplier in a given economy is 2.5. If government spending increases by 10, how much will GDP increase by?

10 * 2.5 = 25

2. Again, suppose the multiplier is 2.5. If investment spending falls by 4, what will be the change in GDP?

- Invetment spending falls by 4 --> - 4

2.5 * - 4 = - 10

3. Again, suppose that the multiplier for a given economy is 2.5. The authorities believe that GDP is currently below potential, and would like it to increase by 5. How much should they raise government spending to bring this about?

2. 5 * ___ = 5 ---> 5/2 = 2

Government spending should raise to 2

4. Suppose the marginal propensity to consume in an economy is equal to 0.75. What is the marginal propensity to save?

mpc = 0.75

marginal propensity to save = 1 - 0.75 = 0.25

5. Again, suppose the marginal propensity to consume is 0.75. If GDP increases by 20, what is the change in consumption?

mpc = 0.75

GDP (Y) = 20

C = 0 + 0.75 * 20 = 15

6. Suppose the marginal propensity to consume in an economy is equal to 0.75. If there were no taxes and no foreign trade, what would the multiplier be?

mpc = 0.75

1 - 0.75 = 0.25

0.25 â> 1/4

1 / 1/4 = 4/1 = 4

multiplier = 4

* I would like to know if my answers are correct and if I used the correct formulas to find the answers. Thank you.

carminepanda548

1. Suppose the supply curve with no quota is

Q No Quota=-10 + 0.5p

and the market supply with a quota is

Q Quota=0.5 + 0.25p.

Output (Q) is in thousands of units.

Assuming an inverse demand curve of p = 80-2Q, what will be the effect of a binding quota on equilibrium price and quantity?

A. Price rises by $2.67 and output falls by 1.33 thousand.

B. Price falls by $5 and output falls by 2 thousand.

C. Price falls by $1.33 and output rises by 2.67 thousand.

D. Price rises by $5 and output falls by 2 thousand.

E. Price falls by $3 and output rises by 1.25 thousand.

F. Price rises by $5 and output rises by 2 thousand.

Which of the following is true?

A. The elasticity of supply varies only along the upward-sloping linear supply curves.

B. The elasticity of supply varies along most supply curves.

C. The elasticity of supply is constant along most supply curves.

D. None of the above.

A. When I> 1, supply is considered elastic.

B. When 0<I< 1, supply is considered inelastic.

C. When I = 1, supply is considered unit elastic.

D. All of the above.

E. None of the above.

yellowox78

ECN 101 Study Guide - Midterm Guide: Fiscal Multiplier, Money Supply

Document Summary

Get access

Related Documents

ECN 101 Final: ECN 101 Final Exam Spring 2009 Solutions

ECN 101 Midterm: ECN 101 Midterm 1 Spring 2013 Solutions

ECN 101 Study Guide - Final Guide: Real Interest Rate, Loanable Funds, Real Wages

Related Questions