An inflationary gap is the amount by which aggregate expenditures ____ the amount required to achieve full-employment equilibrium GDP. A) exceed B) equal C) fall short of D) are greater than.

4. The investment demand curve The following table shows the expected rate of profit and the cumulative amount of investment with that rate of profit or higher in a hypothetical economy. For example, $100 billion worth of investment projects have an expected rate of profit that is greater than or equal to 8%. Put another way, at an interest rate of 8%, the amount of investment demanded equals $100 billion. Expected Rate of Profit Cumulative Investment at this Rate of Profit or Higher (Percent) (Billions of Dollars) 75 INTEREST RATE (Percent) 16 15 14 13 12 + 11 10 2 0 Using the blue points (circle symbol), plot the hypothetical economy's investment demand curve (1) on the graph. Line segments will automatically connect the points. H+++ 10 0 8 6 4 100 25 125 150 50 75 100 126 150 175 200 REAL INVESTMENT (Billions of dollars) Investment Function Determine how each of the following events will shift the investment demand (1) curve. ?

Consider an economy that is operating atthe full-employment level of real GDP.Assuming the MPC is 0.90, predict the effect onthe economy of a $50 billion increase in governmentspending balanced by a $50 billionincrease in taxes.

An inflationary gap is how much GDP needs to decrease from the current GDP to maintain employment while avoiding inflation. Let us say that we are experiencing an inflationary gap of $200 million.  The government decides to increase taxes.  Assume that the MPC equals .80. What will be the tax increase?

If the marginal propensity to consume (MPC) is .90 estimate the total (multiplied) effect of governement purchases/spending of $100B in the economy of its aggregate expenditure

During the 1930s the U.S. entered the Great Depression. During the Great depression investment fell from a yearly rate of $16.7 billion to $1.7 billion. In 1932, President Hoover increased income taxes.  Assume the MPC is .92 C). If  the AD shortfall in 1934 was $300 billion, what change in government expenditures on goods and services (G) would you have recommended to restore full-employment?  D). If the AD shortfall in 1934 was $300 billion, what change in  income/transfer payments would you have recommended ? E). If the AD shortfall in 1934 was $300 billion, what change in income taxes would you have recommended ?

According to Keynes' Law... The total demand for products determine the level of gross domestic product and may not equal the supply capacity of the economy in the short run. The total supply of products determines the level of gross domestic product and the level of demand in the economy in the long run. The total demand always equals the total supply capacity in the short run. The total demand tends to rise above the total supply capacity in the short run which leads to recessions 10 발 lyi

A recessionary gap: Would cause a depletion of inventories. Would occur if total output were less that aggregate demand. Is the amount by which aggregate expenditure falls short of full employment GDP. Is the amount by which total spending exceeds GDP.

The level of AD needed to achieve full employment is $150 billion. The current level of Real GDP (output) is $100 billion. A $5 billion increase in government spending closes the gap and restores FullEmployment. What is the Marginal Propensity to Consume?

What is inflationary gap? Select one: When aggregate expenditures are greater than the full employment level causing a demand pull-inflation When aggregate expenditures are greater than full employment level causing cost push inflation None of the options are correct It is the gap between a developed nation GDP and an under-developed/ developing nation GDP When aggregate expenditures are inadequate to bring about a full employment level