7. Which of the following is true about the annual budget prepared by the Government? * O It is a part of the fiscal policy of the government O It is a part of the money-saving policy of the government O It is a part of the commercial policy of the government It is a part of the monetary policy of the government

The following graph shows the aggregate demand curve ( AD1) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve ( AD2) after the multiplier effect takes place. For simplicity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve ( AD1 ). You can see the slope of AD1 by selecting it on the graph. 140 AD, 135 AD, 130 125 120 115 110 105 100 3 4 OUTPUT (Trillions of dollars) PRICE LEVEL

6. Use the following table to answer these questions:                                   Y                   C                    I                    G                      X                             $ 500               $ 500               $ 10                 $ 20                $ 60                             $ 600               $ 590               $ 10                 $ 20                $ 40                             $ 700               $ 680               $ 10                 $ 20                $ 20                             $ 800               $ 770               $ 10                 $ 20                $   0                             $ 900               $ 860               $ 10                 $ 20              - $ 20                             $ 1,000            $ 950               $ 10                 $ 20              - $ 40       a.What is the Marginal Propensity to Import? b.What is the Marginal Propensity to Invetst? c.What the difference between  both of…

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14) What could explain what is happening in the graph to the right? a. The government has given investors an investment tax credit, increasing investors appetite for savings. b. The government has removed the tax protected status of IRA accounts, increasing savings. c. The government balances the interest rate Το r1 Eo E1 So $1 budget reducing its debt, and the "crowding out" effect disappears. business desire to obtain funds. 90 91 quantity of loanable funds d. A new technology makes industry much more productive, therefore increasing e. There are many things that could explain what the graph shows us, but we don't have enough information to decide on any of a. thru d. above.

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1. The government expenditure multiplier is the effect of a change in government expenditure (G) on goods and services: a. An increase in aggregate expenditure increases aggregate demand (AD), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate demand (AD). b. An increase in aggregate expenditure increases aggregate supply (AS), which increases real GDP, which induces an increase in consumption expenditure (C), and which further increases aggregate supply (AS). c.  An increase in aggregate expenditure decreases aggregate demand (AD), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate demand (AD). d. An increase in aggregate expenditure decreases aggregate supply (AS), which decreases real GDP, which induces an decrease in consumption expenditure (C), and which further decreases aggregate supply (AS).   2.  How do banks create money? Group of…

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2. Assume a given economy has an equilibrium GDP of $360 billion. A. If government spending and taxes both increase by $40 billion, determine the new equilibrium GDP. B. If both G and taxes increase by $40 billion, what impact will these two changes happening at the same time have on the budget? In other words, will these two changes cause a surplus, a deficit, or a balanced budget? C. Solve for the numerical value of the balanced budget multiplier.