# Module 9

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ECO/EMCC William Ashley

### If MPC = .5, a simultaneous increase in both taxes and government spending of \$20 will: Answer

￼ increase GDP by \$20.

￼ \$400.

￼ 30.

### If an increase in aggregate expenditures results in no increase in real GDP we can surmise that the: Answer

￼ economy is already operating at full employment.

### In a private closed economy _____ investment is equal to saving at all levels of GDP and equilibrium occurs only at that level of GDP where _____ investment is equal to saving. Answer

￼ actual; planned

### The effect of imposing a lump-sum tax is to: Answer

￼ reduce the absolute levels of consumption and saving at each level of GDP, but to not change the size of the multiplier.

### If the multiplier in an economy is 5, a \$20 billion increase in net exports will: Answer

￼ increase GDP by \$100 billion.

￼ 3.

￼ \$300.

￼ \$10.

￼ \$280 billion

### (Advanced analysis) Answer the question on the basis of the following information for a private open economy: Refer to the above information. This nation is incurring: Answer

￼ a trade deficit.

### Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE2, the: Answer

￼ economy is in equilibrium, at full employment.

### If aggregate expenditures exceed GDP in a private closed economy: Answer

￼ planned investment will exceed saving.

￼ \$400.

### The MPC and MPS in the above economy: Answer

￼ are .6 and .4 respectively.

￼ AB/GF.

￼ \$65.

### Refer to the above table. An increase in net exports of \$10 would: Answer

￼ increase real GDP by \$30.

￼ \$180 billion.

### The U.S. recession of 2007-2009 provides a good example of: Answer

￼ a recessionary expenditure gap.

￼ 4.

￼ \$300.

### In the United States from 1929 to 1933, real GDP ____________, and the unemployment rate _______________. Answer

￼ declined by 27 percent; rose to 25 percent

￼ \$40.

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