# Autonomous expenditures

If the price level doubles, aggregate expenditures will?

In the multiplier model, if the mpe is x, then the multiplier is?

The multiplier model assumes that the price level is?

The multiplier equals?

If an increase in income of $125 causes aggregate expenditure to increase from $1,250 to $1350, then the marginal propensity to expend equals?

The level of income where the expenditures function intersects the 45-degree line is the point?

Assume the mpe = 0.8, GDP = $2,400 billion, and potential GDP = $2,200 billion. According to the multiplier model, the economy could achieve potential GDP if government spending were?

In the multiplier model, if the marginal propensity to expend is 0.8, a $300 change in income leads to a?

Suppose that political unrest in North Korea causes investment to decline by 40. The multiplier model implies that if the <i>mpe</i> is 0.75, income would decline by?

Graphically, the aggregate production curve is a straight line that?

The multiplier process works because when expenditures don't equal production?

Autonomous expenditures are expenditures that?

The multiplier equation is?

The expenditures function that reflects the table below is?

In the multiplier model if autonomous exports fall by 40 and government spending increases by 20, and the mpe is .8, what happens to equilibrium income?

Between 2002 and 2003, U.S. imports rose by $60 billion while U.S. income increased by $300 billion. Assuming all else equal, this implies that the U.S. marginal propensity to?

Graphically, the aggregate production curve is a straight line that?

The level of income where the expenditures function intersects the 45-degree line is the point?

#### Solution Preview

If the price level doubles, aggregate expenditures will? Less than double, since there are certain parts of AE that are not dependent on the price level.

In the multiplier model, if the mpe is x, then the multiplier is? 1/(1-x). In general this is just relating the MPE to the slope of AE curve.

The multiplier model assumes that the price level is? Fixed. In case prices change there will be changes in the AE curve.

The multiplier equals? 1/(1-MPE) where MPE is the marginal propensity to expend, or the slope of the AE curve.

If an increase in income of $125 causes aggregate expenditure to increase from $1,250 to $1350, then the marginal propensity to expend equals? Chane in income is $125, and change in expenditure is $100. Thus MPE is 100/125 = 0.8.

The level of income where the expenditures function intersects the 45-degree line is the point? That point is the equilibrium aggregate expenditure.

Assume the mpe = ...

#### Solution Summary

The level of income and other questions are posed.