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Economics: Principles, Problems, and Policies

Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

Chapter 29

The Aggregate Expenditures Model - all with Video Answers

Educators

Chapter Questions

02:42

Problem 1

True or False: The aggregate expenditures model assumes flexible prices.

Jonathan Tapiwa
Jonathan Tapiwa
Numerade Educator
01:48

Problem 2

If total spending is just sufficient to purchase an economy's output, then the economy is:
a. In equilibrium.
b. In recession.
c. In debt.
d. In expansion.

Alejandro Ruiz
Alejandro Ruiz
Numerade Educator
02:51

Problem 3

True or False: If spending exceeds output, real GDP will decline as firms cut back on production.

Pragya Ahuja
Pragya Ahuja
Numerade Educator
04:13

Problem 4

If inventories unexpectedly rise, then production _____ sales and firms will respond by _____ output.
a. Trails; expanding.
b. Trails; reducing.
c. Exceeds; expanding.
d. Exceeds; reducing.

Haricharan Gupta
Haricharan Gupta
Numerade Educator
01:14

Problem 5

If the multiplier is 5 and investment increases by $\$ 3$ billion, equilibrium real GDP will increase by:
a. $\$ 2$ billion.
b. $\$ 3$ billion.
c. $\$ 8$ billion.
d. $\$ 15$ billion.
e. None of the above.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
00:55

Problem 6

A depression abroad will tend to _____ our exports, which in turn will _____ net exports, which in turn will _____ equilibrium real GDP.
a. Reduce; reduce; reduce.
b. Increase; increase; increase.
c. Reduce; increase; increase.
d. Increase; reduce; reduce.

Prashant Bana
Prashant Bana
Numerade Educator
09:57

Problem 7

Explain graphically the determination of equilibrium GDP for a private economy through the aggregate expenditures model. Now add government purchases (any amount you choose) to your graph, showing its impact on equilibrium GDP. Finally, add taxation (any amount of lump-sum tax that you choose) to your graph and show its effect on equilibrium GDP. Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the sizes of the government purchases and taxes that you selected.

Sandile Ndlovu
Sandile Ndlovu
Numerade Educator
03:43

Problem 8

The economy's current level of equilibrium GDP is $\$ 780$ billion. The full employment level of GDP is $\$ 800$ billion. The multiplier is $4 .$ Given those facts, we know that the economy faces _____ expenditure gap of _____.
a. An inflationary; $\$ 5$ billion.
b. An inflationary; $\$ 10$ billion.
c. An inflationary; $\$ 20$ billion.
d. A recessionary; $\$ 5$ billion.
e. A recessionary; $\$ 10$ billion.
f. A recessionary; $\$ 20$ billion.

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:15

Problem 9

If an economy has an inflationary expenditure gap, the government could attempt to bring the economy back toward the full-employment level of GDP by _____ taxes or _____ government expenditures.
a. Increasing; increasing.
b. Increasing; decreasing.
c. Decreasing; increasing.
d. Decreasing; decreasing.

Alejandro Ruiz
Alejandro Ruiz
Numerade Educator