Answer the following question In the aggregate expenditures model, it is assumed

ID: 1094440 • Letter: A

Question

Answer the following question

In the aggregate expenditures model, it is assumed that investment: The level of aggregate expenditures in the private closed economy is determined by the: Refer to the above diagram that applies to a private closed economy. The APC is equal to 1 at income level: Refer to the above diagram that applies to a private closed economy. If aggregate expenditures are C + Iv, the amount of saving at income level J is: Refer to the above diagram for a private closed economy. The equilibrium GDP is: Refer to the above diagram for a private closed economy. In this economy investment: Refer to the above diagram for a private closed economy. Aggregate saving in this economy will be zero when: At equilibrium real GDP in a private closed economy: Which of the following statements is correct for a private closed economy? That the economy has achieved aggregate equilibrium is indicated by: Investment and saving are, respectively: Imports have the same effect on the current size of GDP as: Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP: Complete the following table and answer the next question(s) on the basis of the resulting data. All figures are in billions of dollars. Refer to the above table. For the open economy the equilibrium GDP and the multiplier are: Other things equal, an increase in an economy's exports will:

Explanation / Answer

1.d.

Does not changes when real GDP changes

2.a.

Expenditure of consumers and business

3.d.

The APC is equal to 1 at the income level G, because the consumption curve intersects the 45 degree line, corresponding to the income level G, where all the income thus earned is consumed.

4.b.

The amount of saving corresponding to income level J will be KN, because at equilibrium, the investment has to be equal to saving. Thus, given the investment of Ig2 the saving will also be equal to Ig2, which is represented by the gap KN.

5.b.

In the privately closed economy, the equilibrium GDP is determined where private consumption and investment expenditure intersect 45 degree line. Therefore, from the graph, the equilibrium GDP is $180 billion.

6.c.

The investment is represented by gap between initial consumption curve and consumption plus investment expenditure curve. If one draws a perpendicular curve from the consumption curve to private spending curve, one will find that the gap is represented by $40 billion. Therefore, the investment is $40 billion at all levels of GDP.

7.c.

The saving in the economy will be zero at GDP of $60 billion, because corresponding to this level of income, all income earned is consumed.

8.c.

Aggregate expenditures and real GDP are equal.

9.a.

Saving equals planned investment only at the equilibrium level of GDP.

10.d.

All of these.

11.c.

Injection and leakages.

12.d.

Saving.

13.b.

US GDP will fall.

Net Export ($)

Aggregate Expenditure in open economy ($)

$10

$240

$10

$ 280

$10

$320

$10

$360

$10

$400

$10

$440

$10

$480

14.d.

The equilibrium GDP will be corresponding to the intersection of Domestic output and aggregate expenditure in the open economy. Therefore, the equilibrium GDP is $400 and multiplier is 5 {=1/(1-MPC)}; MPC=40/50.

15.d.

Increase its domestic aggregate expenditure and therefore increase its equilibrium GDP.