In macroeconomics, equilibrium is defined as the point at which: A) the economy

Question

In macroeconomics, equilibrium is defined as the point at which:

A) the economy attains the highest level of GDP.

B) there is no unemployment in the economy.

C) people

Explanation / Answer

Hi, If you like my answer, please rate my answer first and according to my answer...that way only I can earn points. Thanks In macroeconomics, equilibrium is defined as the point at which: C) peoples plans match the reality. The equilibrium level of income will rise when: C) supply exceeds demand. If aggregate expenditures are less than real GDP, then: A) both inventories and real GDP will decline. At the equilibrium level of income, which of the following is true? D) Aggregate expenditures equal real GDP Assume we are at an income level where the C+I+G+X (consumption+investment+government spending+net exports) function lies above the 45-degree line. We can conclude that at this income level: E) there will be pressure to expand production. Which of the following can be considered an injection that can offset leakages in an economy and help it attain equilibrium? E) Taxes Assume that an economy is in equilibrium with a budget deficit of $130 billion, positive net exports of $453 billion, and a saving level of $1,550 billion. If taxes are zero, then planned investment spending must be equal to: D) $1,227 billion. Savings are good for a family. If all families increase savings, the economy is better off. This fallacy of composition is called: C) the paradox of thrift. If Saving+Tax+Import > Investment+Government spending+Export, then _____ must fall to establish macroeconomic equilibrium. D) real GDP Suppose in an economy, investment = $40, saving = $50, government spending+export = $100 and taxes+imports = $110. Then for this economy, total leakages exceed total injections by: E) $20. Suppose an economy operates at a real GDP level of $855, where saving = $400; investment = $95; government spending = $365; taxes = $130; imports = $210; exports = $170. Which of the following statements is true in the light of the given information? D) Real GDP will fall, because total leakages exceed total injections by $110. Suppose an economy has a government budget surplus of $100, net exports of -$400, and a planned investment level of $1,000. For this economy to be in equilibrium, saving must equal: A) $700. Ceteris paribus, a downward shift in the net exports function will cause: A) equilibrium real GDP to decrease. The percentage of a change in income that is spent domestically is: E) the sum of the MPS and the MPI. The spending multiplier measures the change in equilibrium income that results from a change in: A) consumption. At each round of the multiplier process, increases in income: B) leak out of the expenditures stream in the form of saving and imports. Assume that the marginal propensity to consume equals 0.75 and the marginal propensity to import equals 0.10. By how much does spending on domestic goods increase if income increases by $300? A) $195 Assume that an increase of $300 in exports leads to an increase of $750 in equilibrium income. If the marginal propensity to import equals 1/10, the marginal propensity to save must be _____. D) 0.30 If MPS is equal to 0.15 and MPI is equal to 0.10, an initial change in expenditures of $19,000 would result in a total change in income equal to _____. D) $76,000 What is the value of the spending multiplier when MPC = 0.85 and MPI = 0.3? C) 2.22 Consider an economy that is in equilibrium with real GDP = $5,000, MPS = 1/4 and MPI = 1/5. What will be the new equilibrium level of income if planned investment spending increases by $500? C) $6,111 If equilibrium income is $500 billion, MPC = 0.8, MPI = 0.2 and autonomous government spending increases by $20 billion, the new equilibrium income will be _____. B) $550 billion. In an economy that has no foreign trade, if real GDP declines by $160 million following a decline in investment spending of $40 million, then the marginal propensity to consume must be equal to _____. D) 0.75 In a closed economy that does not have international trade, the spending multiplier equals _____. A) 1/MPS If an economy consumes 75 percent of any increase in real GDP and spends 10 percent of this increased income on imports, then a decline in government spending by $60 million will result in a total reduction in equilibrium income of: A) $171.43 million. Suppose equilibrium income decreases by $600 as a result of a change in government spending. If the multiplier is 3, what is the change in government spending? C) Government sending will decrease by $200 Consider a closed economy described by AE (aggregate expenditures) = 800,000 + 0.75Y Assume that this economy is initially in equilibrium. But now the government implements a program to improve highways that will cost $1 million. This implies that equilibrium real GDP will: D) increase by $4 million. If the spending multiplier equals 5 and equilibrium income is $2 billion below potential GDP, then _____ to reach the potential real GDP level. E) total spending needs to increase by $0.4 billion Assume that a GDP gap can be closed by a $200 initial change in planned spending. The MPS is 0.3 and the MPI equals 0.1. If the economy is currently in equilibrium with an income level of $600, potential GDP equals: C) $800. Assume that potential GDP is $200 billion and the multiplier equals 5. The recessionary gap is $10 billion. What is the actual level of equilibrium income? B) $150 billion If a countrys imports are very important in determining the volume of exports from its trading partners, then: A) the simple spending multiplier understates the true value of the multiplier. The spending multiplier equals 1/marginal propensity to save if an economy: C) produces and consumes only domestic goods and services. Foreign repercussions of changes in domestic spending may cause: C) the actual spending multiplier to be larger than the reciprocal of the marginal propensity to save plus the marginal propensity to import. Suppose only 7 percent of Turkeys products go to the United States. Hence, an increase in U.S. imports from Turkey: A) would have no significant effect on Turkeys domestic income. If 81 percent of Canadas exports go to the United States, a recession in the United States would probably: D) decrease Canadas domestic real GDP. Assume that the multiplier effect for Mexico is 0.85 when U.S. government spending increases. Therefore, a $20 billion decrease in U.S. government spending results in: D) a $17 billion decrease in Mexican real GDP. The multiplier effect of a change in foreign autonomous expenditures in the U.S.: B) is large because the United States imports a significant amount of foreign goods and services. Suppose the marginal propensity to consume is 0.63, the marginal propensity to import equals 0.08, and personal income taxes amount to 9 percent. The spending multiplier for this economy is equal to _____. E) 1.85 ( I am getting 1.97) The Keynesian aggregate expenditures model assumes that: D) aggregate supply determines the equilibrium level of real GDP. A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the: D) wealth effect. The interest rate effect states that an increase in the price level will cause: A) a decline in the interest rate. If equilibrium in the economy is merely a function of aggregate demand, the aggregate supply curve must be: D) vertical. When the purchasing power of money declines: C) demand for money increases and interest rates rise. Which of the following will not increase aggregate expenditures? D) An increase in income taxes

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