If unplanned change in inventory is zero aggregate output is positive when planned aggregate expenditures are positive. aggregate output is less than planned aggregate expenditures. aggregate output is greater than planned aggregate expenditures. aggregate output equals planned aggregate expenditures

If unplanned change in inventory is zero aggregate output is positive when planned aggregate expenditures are positive. aggregate output is less than planned aggregate expenditures. aggregate output is greater than planned aggregate expenditures. aggregate output equals planned aggregate expenditures

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 11P

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As you know equilibrium occurs where Y = AE. That is, where aggregate output equals planned aggregate expenditure. Remember that planned aggregate expenditure in an economy with a government is AE = C +I+ G, so equilibrium is Y = C+I+ G. If output (Y) exceeds planned aggregate expenditure (C +I+G), there will be an unplanned increase in inventories. That means actual investment will exceed planned investment. Conversely, if C+I+G exceeds Y, there will be an unplanned decrease in inventories. Assume that MPS is 0.25 and autonomous consumption is 100 (autonomous consumption is defined as the expenditures that consumers must make even when they have no disposable income). Assume also that government spending (G) is 200 and the government is running a balanced budget. Assume also that planned investment (I) is 150. a) Write the consumption and saving functions (equations) b) Calculate the planned AE at any three levels of aggregate output (income) and unplanned inventory changes…
TRUE/FALSE If aggregate expenditures exceed aggregate income then inventories will rise and firms will eventually lay off workers.
The desired aggregate expenditure function of an economy is illustrated in the graph to the right. The dashed line, Y*, shows the potential level of national income in this economy. The marginal propensity to spend is 0.75. Use the point drawing tool to plot and label the equilibrium level of income. Carefully follow the instructions above, and only draw the required object. Desired Aggregate Expenditure ($ billions) 3,750- 3,000- 2,250- 1,500+ 750 500 0- Aggregate Expenditure Function 0 45 line AE Y = 3,000 4,000 1,000 2,000 3,000 Actual National Income ($ billions)
If economists forecast a decrease in aggregate expenditure, which of the following is likely to occur?GDP will rise. GDP will fall. Wages will rise. Inventories will fall.
If disposable income is 85 per cent of national income, the marginal propensity to consume (out of disposable income) is 0.7, and imports are 22 per cent of national income, then the marginal propensity to spend on national output is:
In an economy with no government and no foreign sectors, autonomous consumer spending is $250 billion, planned investment spending is $350 billion. Suppose that in general, consumers save a third of any additional disposable income they have. Plot the aggregate consumption function and planned aggregate spending.
Firms in a small economy planned that inventories would grow over the past year by $300,000. Over that year, inventories actually grew by $400,000. This implies that a) planned aggregate expenditure that year was equal to GDP that year. b) planned aggregate expenditure that year was less than GDP that year. c) consumer spending grew faster than expected. d) there was a planned decrease in inventories that year. e) there was an unplanned decrease in inventories that year.
Macroeconomic equilibrium occurs when aggregate expenditure = GDP. aggregate expenditure = C+ I + G + net transfers. aggregate income = planned inventories. aggregate income = planned inventories. 88. If economists forecast a decrease in aggregate expenditure, which of the following is likely to occur? GDP will rise. GDP will fall. Wages will rise. Inventories will fall.
At a aggregate output level of $200 billion what is planned aggregate expenditure?
If output is less than planned aggregate expenditure, there will be Group of answer choices no change in inventories. an unplanned increase in inventories. an unplanned decrease in inventories. a planned increase in inventories.
If the multiplier in an economy is 5, a $20 billion increase in net exports will. make sure the answer is accurate.Group of answer choices decrease GDP by $100 billion. increase GDP by $20 billion. increase GDP by $100 billion. reduce GDP by $4 billion.
When the price level falls A) the slope of the aggregate expenditures curve changes. B) the aggregate expenditure curve remains constant. C) the aggregate expenditures curve shifts down. D) the aggregate expenditures curve shifts up