Macro Ch 12

If firms find that consumers are purchasing more than expected, then?

A decrease in consumer confidence can put your job at risk if

When aggregate expenditure=GDP,

Household spending on goods and services is known as

If inventories decline by more than analysts predict they will decline, this implies that

Increasing house prices

If planned aggregate expenditure is less than total production,

Components of aggregate expenditure?

Not a component of aggregate expenditure?

Planned aggregate expenditure is equal to

Investment spending ____ during a recession, and _____ during an expansion

During a(n) ____ many firms experience increased profits, which increases ____ and investment spending

_____ describes the relationship between consumption spending and disposable income

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

On the 45 degree line diagram, the 45 degree line shows points where

True/false- the multiplier rises as the MPC rises

true/false- the smaller the MPC, the larger the multiplier

true/false- the multiplier effect does not occur when autonomous expenditure decreases

true/false- the multiplier is a value between zero and one

Disposable income is

Ratio of the increase in ____ to increase in ____ is called the multiplier

Economists first began studying the relationship between changes in aggregate expenditures and changes in GDP during

____ is defined as the value of a households assists minus the value of its liabilities

John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending,

MPC + MPS=

The marginal propensity to save is defined as

On the 4 degree line diagram, for points that lie below the 45 degree line

If planned aggregate expenditure is less than total production

What raises consumer expenditures?

What does not raise consumer expenditures?

An unplanned increase in inventories results from

If firms sell exactly what they expected to sell then

If firms sell exactly what they expected to sell, what won't occur

Investment spending will increase when

Concerned that its dependence on sales of microprocessors to computer firms would make it vulnerable to sharp sales declines during the recession of 2007-2009, Intel began to develop memory chips that could be used in portable consumer electronic devices such as cell phones. One reason that Intel chose to branch out from producing microprocessors for computers is that

At macroeconomic equilibrium

Assume that inventories declined by more than analysts predicted. This implies that

Decreases in the price level will

National income=

Housing wealth is equal to

What causes a direct increase in consumption spending

What does not cause a direct increase in consumption spending

Key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by

Consumption spending is $22 million, planned investment spending is $7 million, actual investment spending is $7 million, government purchases are $9 million, and net export spending is $3 million. the following is true?

Consumption spending is $22 million, planned investment spending is $7 million, actual investment spending is $7 million, government purchases are $9 million, and net export spending is $3 million. the following is not true?

Consumer spending ___ and investment spending ____

Inventories refer to

54) Consumption spending is $16 million, planned investment spending is $4 million, unplanned investment spending is $2 million, government purchases are $6 million, and net export spending is $1 million. What is aggregate expenditure?

US net export spending rises when

Increases real GDP

Does not increase real GDP

If inflation in the US is higher than inflation in other countries, what will be the effect on net exports for the US

The aggregate expenditure model focuses on the relationship between ___ and ___ in the short run, assuming ___ is constant

If economists forecast a decrease in aggregate expenditure, how will the economy reach macroeconomic equilibrium?

____ usually increase(s) when the US economy is in recession and decrease(s) when the US economy is expanding

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?

Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $27 million, what unplanned changes in inventories occurred?

The five most important variables that determine the level of consumption are

An increase in the real interest rate will

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then

____ in taxes will decrease consumption spending, and ____ in transfer will increase consumption spending

In a small economy in 2011, aggregate expenditure was $800 million while GDP that year was $850 million. the following can explain the difference between aggregate expenditure and GDP that year?

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity is consume is

If the economy is currently in equilibrium at a level of GDP that is below potential GDP, what would move the economy back to potential GDP

Actual investment spending does not include

Actual investment spending includes

When we graph consumption as a function of ________ rather than as a function of disposable income, the slope of this consumption function is ________.

As a result of slow economic growth in 2011, many companies including Cisco Systems, Lockheed Martin, and Cracker Barrel Old Country Store cut production and employment as a result of the sluggish growth in the total amount of spending in the economy. The total amount of spending in the economy is known as

Following three years of negative growth, restaurant sales in the United States were expected to increase 3.6 percent in 2011. If the increase in restaurant sales increases aggregate expenditure,

A decrease in Social Security payments will

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is

The multiplier is calculated as the

When aggregate expenditure is more than GDP, what occurs

True/false- when aggregate expenditure is more than GDP households bought fewer new homes than they planned

True/false- when aggregate expenditure is more than GDP firms spent less on capital goods than they planned

A stock market boom which causes stock prices to rise should cause

___ consumption is consumption that does not depend upon the level of GDP

Examples of assets that are included in household wealth would be

The aggregate expenditure model focuses on the ___ relationship between real spending and ____

In the aggregate model, ___ has both an autonomous component and an induced component

True/false- the multiplier makes the economy less sensitive to changes in autonomous expenditure

true/false- the formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation, and the interest rate

true/false- the multiplier is the ratio of the change in real GDP to the change in autonomous expenditure

the larger the MPC, the larger the multiplier

The passage of the Smoot-Hawley Tariff in 1930 sparker a trade war that caused net exports to ___ and real GDP to ___

Firms in a small economy planned that inventories would grow over the past year by $500,000. Over that year, inventories did grow by exactly $500,000. This implies that

true/false- one of the four main categories of spending identified by John Maynard Keynes is government purchases

true/false- one of the four main categories of spending identified by John Maynard Keynes is taxes

true/false- one of the four main categories of spending identified by John Maynard Keynes is consumption

true/false- one of the four main categories of spending identified by John Maynard Keynes is net exports

How does a decrease in government spending affect the aggregate expenditure line

If disposable income falls by $50 billion and consumption falls by $40 billion, then the slope of the consumption function is

From 1983-2011, net exports for the US

A general formula for the multiplier is

The formula for aggregate expenditure is