C = $420 billion + 0.8 (YD) I = $400 billion G = $425 billion T = $400 billion 1
ID: 1099269 • Letter: C
Question
C = $420 billion + 0.8 (YD)
I = $400 billion
G = $425 billion
T = $400 billion
1. In equilibrium, output and income will equal _________ billion and disposable income will equal ________ billion according to the Kaynesian model.
2. If full-employment real GDP in this economy is $4,750 billion, then:
a. a recessionary gap exists.
b. an inflationary gap exists.
c. the economy is at full-employment equilibrium.
d. this economy can never achieve full employment.
3. If full-employment real GDP in this economy is $4,750 billion, how much of an increase in government spending would be necessary to achieve equilibrium at full employment given the simplifying assumptions of the Keynesian model?
a. $25 billion
b. $31.25
c. $100 billion
d. $125 billion
4. If full-employment real GDP in this economy is $4,750 billion, how much of a decrease in taxes would be necessary to achieve equilirium at full employment given the simplifying assumptions of the Keynesian model?
a. $25 billion
b. $31.25
c. $100 billion
d. $125 billion
5. If full-employment real GDP in this economy is $4,750 billion and the government either increases government spending or reduces taxes to achieve equilibrium at full employment, then:
a. the initial budget deficit of $25 billion will be eliminated.
b. there will be no effect on the government's budget.
c. the budget deficit will be reduces, but not eliminated.
d. the budget deficit will become larger.
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Explanation / Answer
5) d. the budget deficit will become larger.
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