ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 31, Problem 1RQ
To determine
True or false.
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Figure: Aggregate Expenditures Curve II
Aggregate
expenditures
(per year)
$800
Reference: Ref 11-16
45-degree
line
AE
$2,000 Real GDP (per year)
(Figure: Aggregate Expenditures Curve II) The slope of the aggregate expenditures curve in the aggregate expenditures
model shown in this figure is:
O 45 degrees.
O 0.6.
O 0.5.
O 0.25.
Explanation please
In the Keynesian AE model, if the autonomous components of consumption,
investment, government spending, and net export spending total $100 billion,
and the MPC is 0.75, what will unplanned changes in inventory be when output is
$345 billion?
O-$4 billion
O $4 billion
O $5 billion
O -$5 billion
When output is higher than the intersection of the Keynesian AE and the 45-
degree line, which of the following can we expect to happen?
Osavings to be negative and consumption to fall
O inventories to rise and output to fall
O
inventories to fall and output to rise
consumers to expect higher incomes and consumption to rise
Chapter 31 Solutions
ECONOMICS W/CONNECT+20 >C<
Ch. 31.2 - Prob. 1QQCh. 31.2 - Prob. 2QQCh. 31.2 - Prob. 3QQCh. 31.2 - Prob. 4QQCh. 31.7 - Prob. 1QQCh. 31.7 - Prob. 2QQCh. 31.7 - Prob. 3QQCh. 31.7 - Prob. 4QQCh. 31 - Prob. 1DQCh. 31 - Prob. 2DQ
Ch. 31 - Prob. 3DQCh. 31 - Prob. 4DQCh. 31 - Prob. 5DQCh. 31 - Prob. 6DQCh. 31 - Prob. 7DQCh. 31 - Prob. 8DQCh. 31 - Prob. 1RQCh. 31 - Prob. 2RQCh. 31 - Prob. 3RQCh. 31 - Prob. 4RQCh. 31 - Prob. 5RQCh. 31 - Prob. 6RQCh. 31 - Prob. 7RQCh. 31 - Prob. 8RQCh. 31 - Prob. 9RQCh. 31 - Prob. 1PCh. 31 - Prob. 2PCh. 31 - Prob. 3PCh. 31 - Prob. 4PCh. 31 - Prob. 5PCh. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10P
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Similar questions
- line shows the relationship between planned aggregate expenditure and output, and line represents the condition that planned aggregate expenditure and output are equal. In the Keynesian cross diagram, the the expenditure; 45-degree O45-degree; consumption function 45 degree; expenditure consumption function; 45-degreearrow_forwardPlease I need an explanation on this question.arrow_forwardWhat is the initial change in consumption if an economy's MPC is 0.75 and there is a decrease in taxes of $1 billion? O $1.75 billion O $1 billion O $1.33 billion O $0.75 billionarrow_forward
- 2. L Give Up! Suppose the Japanese economy has been experiencing slow growth. As a result, the Prime Minister, who thinks John Maynard Keynes was the greatest economist ever, has decided to increase government spending. The Prime Minister asks the head of the economic council to determine the increase in government spending necessary to bring the economy to full employment. Assume there is a GDP gap of 1 trillion yen and the marginal propensity to consume (MPC) is 0.60. What advice should the head of the economic council give the Prime Minister? O The recessionary gap is equal to 400 billion yen. O The inflationary gap is equal to 400 billion yen. O The recessionary gap is equal to 625 billion yen. O The inflationary gap is equal to 625 billion yen.arrow_forwardIn a macro model where the marginal propensity to consume out of disposable income is 0.80, the net tax rate is 0.25, and the marginal propensity to import is 0.11, the simple multiplier will be O A. 3.448 O B. 2.041 OC. 0.490 O D. 1.961 O E. 1.408arrow_forward44arrow_forward
- Suppose the level of potential GDP is $6,000 billion, but the equilibrium level of GDP is $7,500 billion. If the marginal propensity to consume is 0.67, how much should government spending be decreased to eliminate the inflationary gap? O $250 billion $1500 billion O $500 billion O $125 billionarrow_forwardIf government spending rises by $100, mps = 0.2, then the GDP multiplier is O 5 O 4 O 1arrow_forwardAssume a closed economy, that taxes are fixed, and the marginal propensity to consume is equal to 0.66. What is the government spending multiplier? O 1.51 3.33 3.03 33.3arrow_forward
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