quiz wrong

• Some of the desired expenditure must either be frustrated or take the form of purchases of inventories of goods that were produced in the past
• Suppose national income is less than its equilibrium amount​ (for example, think of unintended changes in inventories so that I≠Ia​). That​ is, desired national income is more than the actual one.​ Hence, the desired consumption is more than the actual one.
• As firms see their inventories being​ depleted, they will increase ​production, thereby increasing the level of national income .
• As firms see their inventories being​ depleted, they will increase ​production, thereby increasing the level of national income .
• In our macro​ model, government purchases​ (G) is autonomous with respect to national income.
• G does not include government transfer payments. Net tax revenue​ (T) is total tax revenue collected by all​ governments, minus total transfer payments
• The formula for the slope of the AE function is z= MPC ⋅(1−t) − m
• C = autonomous expenditure + (MPC out of Y) x Yd

  MPC out of Y = MPC x t (marginal propensity to tax)

  z = (MPC out of Y) - m (marginal propensity to import)
• Using the model from this​ chapter, explain the effect on GDP from an increase in G by​ $5 billion. An increase in spending by​ $5 billion will add

  directly to aggregate demand by this amount and cause an eventual change in national income equal to more than $ 5 billion.
• Using the model from this​ chapter, explain the effect on GDP from a tax rebate equal in value to​ $5 billion.

  a tax rebate equal to $5 billion will add directly to disposable income, so the initial direct increase in aggregate demand will be $ 5 billion times the MPC.
• Can you offer one reason why the minister of finance might choose to emphasize increases in government spending rather than tax reductions in a federal budget in an effort to increase national​ income?

  The minister of finance might chose to emphasize increases in government spending in an effort to increase national income because

  their eventual effect on national income will be larger.
• When a country has a higher marginal propensity to import (m) any change in autonomous spending will have less of an impact on equilibrium GDP

  This means that when m increase, the multiplier goes down
• ​OPEC's actions to restrict oil output significantly increased the world price of oil in 1979dash–1980. Canada is a net exporter of oil.

  This event caused a shift in both the AD curve and the AS curve in​ Canada, causing an increase in equilibrium real GDP and an increase in the price level.
• World commodity prices increased sharply from 2002 to 2008. Many of these commodities are both produced in Canada and used as important inputs for Canadian firms. Assume that Canada is a net exporter of these commodities.

  This event caused a shift in both the AD curve and the AS curve in​ Canada, causing an increase in equilibrium real GDP and an increase in the price level.
• The end of the Cold War in 1990 led to large declines in defence spending in many countries​ (including Canada).

  This event caused a shift in only the AD curve in​ Canada, causing a decrease in equilibrium real GDP and a decrease in the price level.
• The federal government and​ (many) provincial governments reduced corporate​ income-tax rates between 2000 and 2015.

  This event caused a shift in only the AD curve in​ Canada, causing an increase in equilibrium real GDP and an increase in the price level.
• The federal government increased its level of government purchases​ (G) in 2009 and 2010 amidst a global recession.

  This event caused a shift in only the AD curve in​ Canada, causing an increase in equilibrium real GDP and an increase in the price level.
• The beginning of a strong recovery in the United States in 2014 led to a large increase in the demand for many Canadian exports.

  This event caused a shift in only the AD curve in​ Canada, causing an increase in equilibrium real GDP and an increase in the price level.
• The world price of oil fell from U.S.​ $105 per barrel in June 2014 to U.S.​ $50 in February 2015. Canada is a net exporter of oil.

  This event caused a shift in both the AD curve and the AS curve in​ Canada, causing a decrease in equilibrium real GDP and a decrease in the price level.
• h. The uncertainty surrounding the​ COVID-19 pandemic led firms to reduce their desired investment in 2020.

  This event caused a shift in only the AD curve in​ Canada, causing a decrease in equilibrium real GDP and a decrease in the price level.
• A significant and binding increase in thein the minimum wage would shift the AS curve up and to the left
• An increase in labour productivity and no change in wages would shift the AS curve down and to the right
• A decrease in demand for​ Canada's exports would cause a movement down and to the left
• Advances in artificial intelligence that reduce costs in all service industries would shift the AS curve down and to the right.
• A decrease in business confidence that reduces ​firms' desired investment would cause a movement down and to the left
• In the simple macro​ model, the price level was held constant.

  In the macro model of this​ chapter, the price level is endogenous
• Equilibrium GDP is determined by the position of the AE function for each given price level. An equilibrium point for a particular price level corresponds to one point on the AD curve.
• fall in the price level causes an upward shift of the AE curve and a movement downward along the AD curve.
• An increase in autonomous​ expenditure, with no change in the price​ level, causes the AE curve to shift up and causes the AD curve to shift to the right.
• new AE Function with increased wealth(W):

  given C= a + bY + cW and I= d

  AE = C + I = (a + bY + cW) + d
• Change in AE function:

  Given AE (old)= a + bY and AE (new) = c + bY

  ΔAE= c - a (shift up/down)
• Change in Equilibrium National Income:

  Given ΔAE, z=0.5 and k=2

  ΔY= k x Δ AE
• "High mortgage rates discourage new house​ purchases."

  Assuming that housing construction falls when house sales​ fall,

  the investment function shifts​ down, the AE function shifts​ down, and the equilibrium level of national income decreases.
• "Concern over future leads to a reduction in​ inventories."

  The investment function shifts​ down, the AE function shifts​ down, and equilibrium national income falls.
• "Consumers spend as stock market​ soars."

  The consumption function shifts​ up, the AE function shifts​ up, and equilibrium national income increases.
• In the simple model, there is no government and therefore no taxation. The result is that disposable income is equal to national income.
• The aggregate expenditure function in the simple macro model of this chapter is written as AE=a+bY​, and is graphed with desired aggregate expenditure on the vertical axis and actual national income on the horizontal axis.
• The building of a larger arena in Toronto increases the demand for Maple Leafs tickets by Torontonians.

  As a​ result, the real GDP is unchanged
• The building of a larger arena in Toronto increases the demand for Maple Leafs tickets by residents of​ Buffalo, New York. As a​ result, the real GDP increases.
• Expenditures on new computers by​ U.S.-owned insurance companies located in Canada are considered an actual investment when calculating gdp with expenpiture approach