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ECN 204 Lecture Notes - Lecture 5: Glossary Of Partner Dance Terms, Autarky, Xm Satellite Radio

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School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Zohra Jamasi

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Document Summary

11. 1 the aggregate expenditures model: consumption and saving. Investment can be thought of as an injection of spending. Unplanned increases in inventories result when firms produce above-equilibrium. Unplanned decreases in inventories results when firms produce level. 11. 5 changes in equilibrium gdp and the multiplier. In the private closed economy, the equilibrium gdp will change in response to changes in either investment schedules or the consumption schedule. Because changes in the investment schedule usually are the main sources of fluctuation, we direct our attention to them . Exports (x) create domestic production, income and employment. Imports (m) represent goods and services produced abroad. In an open economy, aggregate spending is c + ig + xn, where xn = (x - m) Xn can be either positive or negative. If gdp in other countries is growing, demand for our exports will increase. Our imports are dependant on our own gdp. Both imports and exports are affected by the exchange rate.

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Related Questions

If aggregate expenditures fall short of real GDP in the Keynesian model, then

Question 2 options:

A) employment falls as the economy attains equilibrium.

B) the economy will have deflation.

C) firms are depleting their inventories.

D) the money supply will increase.

Which of the following conditions does not necessarily hold when the economy is in a Keynesian equilibrium?

Question 3 options:

A) There will be no tendency for real GDP to change.

B) The economy will be at full employment.

C) Firms will not have any unplanned inventory investment accumulation

D) Aggregate output will equal aggregate expenditures.

According to the Keynesian model, an economy will have persistent, high unemployment if

Question 4 options:

A) market operate freely.

B) the government runs a budget deficit.

C) firms make too many investments.

D) its total spending is low.

If firms are experiencing unplanned reductions in their inventories,

Question 5 options:

A) firms should reduce their production.

B) aggregate output exceeds aggregate expenditures.

C) firms will increase output and hire more workers.

D) the economy has attained equilibrium

1. The multiplier helps explain

   

A. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
   

B. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
   

C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
   

D. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.

 

2. If the marginal propensity to save (MPS) increases, the multiplier

   

A. decreases.
   

B. can either increase or decrease, depending on what happens to the marginal propensity to consume (MPC).
   

C. stays the same.
   

D. increases.

 

QUESTION 60

The investment function will shift when there is a change in

   

A. the opportunity cost of retained earnings.
   

B. firms' profit expectations.
   

C. the cost of borrowing.
   

D. the interest rate.

1.43 points

QUESTION 61

In the Keynesian model, whenever planned saving exceeds planned investment,

   

A. there will be unplanned inventory accumulation.
   

B. real GDP will not be influenced.
   

C. the interest rate will remain unchanged.
   

D. there will be unplanned inventory depletion.

 

1.43 points

QUESTION 62

In the Keynesian model, whenever planned saving is less than planned investment,

   

A. there will be unplanned inventory depletion.
   

B. the interest rate will remain unchanged.
   

C. there will be unplanned inventory accumulation.
   

D. real GDP will not be influenced.

 

1.43 points

QUESTION 63

Government purchases

   

A. are determined by the political process.
   

B. are determined by the public.
   

C. are influenced by interest rates.
   

D. are determined by suppliers.

 

1.43 points

QUESTION 64

If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP),

   

A. real GDP will either fall or remain unchanged, depending on the MPC.
   

B. real GDP will rise.
   

C. real GDP remains unchanged.
   

D. unplanned inventories will increase and real GDP will fall.

 

1.43 points

QUESTION 65

When the economy is operating at the equilibrium level of GDP, we know that

   

A. total planned real expenditures equal real GDP.
   

B. real net exports equal inventory changes.
   

C. planned real investment spending equals real net exports of zero.
   

D. total planned real consumption expenditures equal real GDP.

 

1.43 points

QUESTION 66

One divided by the marginal propensity to save (MPS) is the formula for

   

A. the inverse of the multiplier.
   

B. the multiplier.
   

C. one minus the multiplier.
   

D. autonomous consumption.

 

QUESTION 67

Thinking like an economist would, which is true of investment?

   

A. Investment represents spending on capital goods.
   

B. Investment is a stock concept.
   

C. Investment is putting money into stocks and bonds.
   

D. It is the portion of disposable income that is not used for consumption or saving.

 

QUESTION 68

Other things being equal, if input prices rise in a country, then there would be

   

A. cost-push inflation.
   

B. demand-pull inflation.
   

C. cost-pull deflation.
   

D. more production and a lower price level.

 

QUESTION 69

In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that

   

A. existing capital equipment can be used more intensively.
   

B. wage rates rise almost simultaneously with the price level.
   

C. the unemployment rate usually rises dramatically along with the price level.
   

D. workers can be switched from counted to uncounted production.

Suppose that the Australian economy is at long run equilibrium, and the Australian government announces its decision to decrease spending on infrastructure.

Discuss the short-run effects of a decrease in spending on aggregate espenditure (AE) and aggregate demand (AD). in your discussion, explain the process that moves the economy to its new equilibrium output. That is, explain what would happen to:

1. aggregate planned expenditure

2. firms inventories and production

3. disposable income and consumption expenditure

4. aggregate demand and supply

5. real GDP and price level

Use the AE and AD Graph for your graphical analysis to support your explanation.