One of the debates surrounding changes in government spending is its effect on the size of national income. On separate AD/AS diagrams illustrate the following scenarios: (i) an increase in government spending which is entirely crowded out; (ii) an increase in government spending which increases business confidence and induces a rise in investment expenditure.

One of the debates surrounding changes in government spending is its effect on the size of national income. On separate AD/AS diagrams illustrate the following scenarios: (i) an increase in government spending which is entirely crowded out; (ii) an increase in government spending which increases business confidence and induces a rise in investment expenditure.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 4SQ

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given a particular aggregate expenditure function , which of the following must be true if the prevailing level of income is greater than planned aggregate
TRUE/FALSE If aggregate expenditures exceed aggregate income then inventories will rise and firms will eventually lay off workers.
The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What is the equilibrium level of national income for this economy? A) Y=200 B) Y=400 C) Y=300 D) Y=500
The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What does consumption equal when income equals 600? Group of answer choices a. 324 b. 374 c. 540 d. 104
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The aggregate expenditures model assumes that the level of net exports is independent from the real GDP true or false
For all points below the 45 degree line, planned aggregate expenditure will be less than GDP. True False
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After government is added to the income-expenditure model, the formula for the aggregate consumption function is Group of answer choices C = a - b(T - Y). C = a + b(Y + T). C = a - b(Y - T). C = a + b(Y - T).