When consumer confidence falls in an economy, _____ will decrease which is going to be _____ by the spending multiplier. correct answers spending; magnified
What does the "paradox of thrift" say? correct answers An economy that saves too much can end up with lower savings.
How does the spendi...
EC 111 Test 2 || All Answers Are Correct 100%.
When consumer confidence falls in an economy, _____ will decrease which is going to be _____
by the spending multiplier. correct answers spending; magnified
What does the "paradox of thrift" say? correct answers An economy that saves too much can end
up with lower savings.
How does the spending multiplier compare between a $1,000 increase in government spending
and a $1,000 decrease in taxes collected? correct answers An increase in government spending
has a greater multiplier than an equivalent tax decrease
According to the balanced budget multiplier, an increase in government spending of $10,000 that
is financed by an increase of $10,000 in taxes will have what effect on the economy when MPX
is 0.80? correct answers Income will increase by $10,000
If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n) ______ gap
exists and will require a(n)______ in spending to bring the economy back to full employment
correct answers Inflationary; decrease
The figure shows the aggregate expenditures line for an economy. Which is the proper sequence
of events if income was originally at $100 correct answers Total spending exceeds income, firms
expand production, workers are hired and income rise until equilibrium is reached
Suppose the marginal propensity to consume in Economia is 0.75. People feel increasing
confidence in their economy and spend $5 billion more on vacations. Equilibrium income will
rise by $ correct answers 20 billion
If the marginal propensity to save 0.20, the spending multiplier is: correct answers 5
In the simple Keynesian model with no government and foreign sectors, assume that full
employment occurs at an output level of $20,000. With marginal propensity to save of 0.20 and
equilibrium output at $15,000, by how much will investment spending have to increase to move
the economy to full employment? correct answers $1,000
What occurs when spending is above the full employment level correct answers Inflationary gap
Assume that the MPC is 0.75. Full employment is considered to be at GDP level of $500 billion.
The GDP is $600 billion. What should the government do to achieve full employment? correct
answers Reduce spending by $25 billion
Potential GDP correct answers is independent of the price level
If disposable income increases from $5,000 to $5,400 and consumption increases from $4,000 to
$4,200, what is the average propensity to consume when disposable income is $5,400 correct
answers 0.78
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