Exhibit 19-3 Keynesian aggregate expenditures model 16 14 Real aggregate 12 expenditures 10 8 6 (trillions of dollars per year) 4 2 AE 45° 0 2 4 6 8 10 12 14 16 18 Real GDP (trillions of dollars per year) As shown in Exhibit 19-3, if GDP is S6 trillion, the economy experiences unplanned inventory: a. accumulation of $6 trillion. O b. depletion of $2 trillion. O c. accumulation of $2 trillion. O d. depletion of $6 trillion.

LIBR The Aggregate Expenditure or Keynesian macroeconomics model is based upon the theory that the level of GDP in the economy is determined by the level of aggregate spending. True False

Quèstion 1 In an open mixed economy, the inflationary expenditure gap may be described as the O A. excess of Sa + M+T over lg + X+ G at the full-employment GDP. O B. excess of GDP over Ca + lg +Xn + G at the full-employment output. OC excess of Ca + Ig + Xn + G at the full-employment GDP. O D. extra consumption that occurs when investment increases in a full-employment economy.

QUESTION 6 Potential GDP Aggregate expenditure AE, 45° Y. Real GDP (Y) When real GDP is greater than Yo in the diagram above: O A. - inventories will decrease OB. ·Aggregate expenditure will be less than Real GDP OC. Aggregate expenditure will be equal to Real GDP OD. O D. inventories will increase QUESTION 7 Y G Xn $1,000 $1,400 1,400 1,400 1,400 1,400 $0 $800 -$200 2,500 5,000 7,500 10,000 2,300 3,800 5,300 6,800 1,000 1,000 1,000 1,000 -200 -200 -200 -200 Suppose you are given the data in the table above for a hypothetical economy. All data are in billions of dollars. Yis actual real GDP, and C, Ip, G, and Xn are the consumption, planned investment, government purchases, and net exports components of aggregate expenditures, respectively. Calculate the equilibrium GDP (give your answer in billions of $) Aggregate Expenditure