Macroeconomics: Goods Market and Equilibrium Output

Macroeconomics and Goods Market Equilibrium

• Which of the following types of government spending is included when calculating GDP?
  Spending at the federal, state, and municipal levels.
• Which of the following events will cause a reduction in equilibrium output?
  An increase in the marginal propensity to save, an increase in taxes, or a reduction in the marginal propensity to consume (all of the above).
• Based on our understanding of the paradox of saving, we know that a reduction in the desire to save will cause:
  An increase in equilibrium GDP.
• Based on our understanding of consumption and saving, we know that the marginal propensity to consume and the marginal propensity to save must:
  Sum to exactly one.
• Suppose there is an increase in autonomous consumption. Specifically, suppose c₀ increases where C = c₀ + c₁Y_D. This increase in autonomous consumption will cause which of the following to increase?
  Equilibrium income, equilibrium disposable income, and demand (all of the above).
• If C = 2000 + 0.9Y_D, what increase in government spending must occur for equilibrium output to increase by 1000?
  100.
• When the economy is in equilibrium, we know with certainty that:
  None of the above (public saving equals investment, private saving equals investment, G = T).
• When a closed economy is in equilibrium, we know with certainty that:
  I = S + (T - G).
• Inventory investment refers to:
  The difference between production and sales in a given year.
• Disposable income equals:
  The sum of consumption and saving.
• The marginal propensity to consume represents:
  The change in consumption caused by a one-unit change in disposable income.
• Let the consumption function be represented by the following equation: C = c₀ + c₁Y_D. For this equation, we assume that c₁ is:
  None of the above (negative, larger than c₀, different at different levels of income, or equal to one).
• Suppose the consumption equation is represented by the following: C = 250 + 0.75Y_D. Given this information, the marginal propensity to save is:
  0.25.
• Equilibrium in the goods market requires that:
  Production equals demand.
• An economy is in equilibrium when which of the following conditions is satisfied?
  Total saving equals investment.
• Which of the following is included in G?
  Government purchases.
• Which of the following would tend to make the fiscal multiplier smaller?
  An increase in the marginal propensity to save.