GD#1F09.202 - Econ 2020,Fall 2009, Study guide, Exam #1: 1)...

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Econ 2020,Fall 2009, Study guide, Exam #1: 1) Macroeconomics evolved because microeconomics failed to provide adequate answers to what questions: 1) What determines total (aggregate) spending on final goods in an economy? 2) What effect does total spending have on an economy's output ? 3) What causes unemployment ? 4) What determines the rate of interest in an economy? 5) What determines an economy's inflation rate ? 6) What determines an economy's growth rate ? 7) What causes the business cycle ? 2) The one equation in the Keynesian model of income is: (Y=C(Y-T) + I + G + X – M) It says, income must be ----. THE ENDOGENOUS VARIABLE? 3) In the one equation of the Keynesian model, what do C, I, G, X, and M represent? C= CONSUMPTION SPENDING I= INVESTMENT SPENDING G= GOVERNMENT SPENDING X= EXPORT SPENDING M=IMPORT SPENDING 4) Income will equal spending because ----- Equilibrium Income 5) The circular flow diagram is used to illustrate what important macroeconomic relationship? It illustrates that money goes from business to household and money goes from household to business in the inner layer. The outer layer illustrates that inputs go from household to business and goods and services go from business to household. 6) An economy's consumption function shows what? C(Y)=a + b YD is a consumption function equation. They represent specific numbers that may vary from economy to economy. Consumption function is to figure out consumption spending would be. 7) The variable that explains most of the variation in consumption spending is
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This note was uploaded on 03/03/2011 for the course ECON 2020 taught by Professor Mukherjee during the Spring '08 term at Western Michigan.

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GD#1F09.202 - Econ 2020,Fall 2009, Study guide, Exam #1: 1)...

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