ECON - Cheat Sheet - CORRECT If the amount that consumers...

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CORRECT A recessionary gap exists when potential GDP If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that If an increase in investment of $100 billion generates an increase of $500 billion in real GDP, the multiplier is If, at the full employment level of income, the amount that businesses plan to invest is greater than the amount that An expenditure schedule shows the relationship between GDP and total output. If the multiplier is 4 and real GDP increases by $520 billion, the increase in investment spending must have been In a simple economy (no government), the vertical distance between the consumption function and the expenditure schedule measures An inflationary gap will exist when the full employment level of GDP is The economic impact of a change in spending, working through the multiplier, takes effect High unemployment and high rates of inflation are examples of coordination successes.
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FALSE FALSE there will be a recessionary gap. inventory stocks are being depleted. 5.00. there will be an inflationary gap. $130 billion. planned investment less than equilibrium GDP. after multiple rounds of spending occur. exceeds equilibrium GDP.
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INCORRECT An increase in the U.S. price level will If total spending is greater than current output, GDP will rise. FALSE Recessionary gaps are most likely to be accompanied by FALSE Investment spending is a leakage from the circular flow model. TRUE For a given price level, a downward shift of the expenditures schedule corresponds to an outward shift of the aggregate supply curve. shift the expenditure schedule upward. If, at the full employment level of income, the amount that businesses plan to invest is greater than the amount that consumers there will be a deflationary gap. inventory reductions. In a simplified circular flow model with no government, in equilibrium, S = I + (X - IM). In the real world, the actual multiplier is ____ the simplified multiplier. slightly smaller than When businesses are cutting back production, then it probably true that inventory levels are decreasing.
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CORRECT TRUE FALSE TRUE An inflationary gap will occur when The concept of aggregate supply refers to a FALSE TRUE The recessionary gap of the 1990s in Japan led to decreases in the price level. A price level lower than equilibrium will cause quantity supplied to Favorable supply shocks explain the U.S. experience during the real GDP exceeds potential GDP. schedule of output. The Aggregate Supply Curve is a fixed point representing potential Inflation reduces the multiplier effect by reducing consumers' wealth
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INCORRECT The reason that stagflation tends to follow an inflationary gap is that businesses try to increase profits by raising prices and increasing output. In Figure 10-4, if full employment occurs at an output level of 4,000
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This note was uploaded on 04/16/2008 for the course MGMT 375 taught by Professor Higgins during the Spring '08 term at Abilene Christian University.

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ECON - Cheat Sheet - CORRECT If the amount that consumers...

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