JEOPARDY! DOUBLE JEOPARDY DOUBLE JEOPARDY The GapMultiplierLinesReview 100 200 300 400 500.

JEOPARDY!DOUBLE JEOPARDY

The Gap Multiplier Lines Review

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What kind of gap will likely result if there is “not enough”

spending?Recessionary (unemployment) gap

What will result if the demand equilibrium falls to the left of the

potential GDP?

Recessionary (unemployment) gap

What will result if the demand equilibrium falls to the right of

the potential GDP?

Inflationary gap

How is it possible to have a recessionary gap without

currently being is a recession?

Output and income are increasing, while still falling short of full employment

A classical economist would recommend doing this when

experiencing a recessionary gap. Nothing

An additional dollar introduced into the economy is likely to be

spent many times over. This phenomenon is best described by

what key term?The multiplier

This reduces the size of the multiplier

Inflation (Positive slope of supply curve)

If the aggregate supply curve is vertical, the actual value of the

multiplier will be this.

Zero

The Marginal Propensity to Consume is .8. What is the

(oversimplified) multiplier?

5

The multiplier may be expressed as the equation that describes the

sum of an infinite geometric progression. What is this

equation?Multiplier = 1/1-MPC

Graphically, demand equilibrium can be found at the intersection

of what two lines?45 degree, Aggregate Expenditure

The line that displays all of the points at which demand may be

at an equilibrium.45 degree line

The graph of the total quantity of goods and services produced at

each possible price level.Aggregate Supply Curve

Higher wages will lead the aggregate supply curve to shift in

which direction?

Left

A shift in the demand curve will correspond exactly to what?

Multiplied change in expenditure

This is calculated by pricing several hundred items in a market

basket and is used to compare real price levels.

CPI

Complete the formula: _________ = Aggregate Demand

(GDP)

C+I+G+(X-IM)

What will result if consumer spending exceeds income?

Dis-saving

Shows the relationship between total consumption and total

disposable income

Consumption Function

DAILY DOUBLE!

Complete the equation Income – Taxes = ?

DI

C = 40. DI = 50. MPC = ?

.8

DOUBLE JEOPARDY!Final Jeopardy!

Supply Hodge Podge

Labor Alex Trab-economics

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This accounts for 70-80% of the cost of all inputs across the

economy

Wages

Profit per unit = ?

Price – cost per unit

The amount of output produced by a unit of input

Productivity

DAILY DOUBLE

This term is defined as a situation in which neither consumers nor

firms have any incentive to change their behavior.

Equilibrium

Inflation that occurs when the economy is growing slowly or in

recession

Stagflation

List two factors that may influence investment (I).

Confidence/Expectations, Growth of Demand, Technical Change, Interest

Rates, or Taxes

An increase in consumer spending that stems from an

increase in consumer incomes.

Induced increase in consumption

An increase in consumer spending without any increase in

income.

Autonomous increase in consumption

DAILY DOUBLE!

The idea that an effort by a nation to save more may simply reduce national income and fail

to raise total saving. Paradox of Thrift

As aggregate demand increases, what are net exports likely to do?

Decrease

If labor is responsive to changes in price levels, what kind of slope

will AS have?

Vertical

If labor insists on maintaining rigid wages, what will happen to price levels as the demand curve

shifts? It will change very little

If the AS curve is relatively flat, how will the real multiplier relate

to the simplified multiplier?

It will be very close

If labor insists on maintaining rigid wages how will the real

multiplier relate to the simplified multiplier?

It will be very close

If labor’s contracts are directly linked to fluctuations in the CPI, what will be the value of the real

multiplier? Zero

Popular food icon seen below/ The intersection of aggregate

expenditures and the 45 degree line

• Chef Boyar-demand equilibrium

Shows the total amount of output producers will produce at given price levels across the

economy/ Survivor’s most famous song (Yo, Adrian!)

Aggregate Suppl Eye of the Tiger

Bus driver shown here/ a change in spending that is not due to a

change in income.

• Otto nomous increase in spending

She once was a member of the glee club but now she is a student at Yale/ an

increase in consumer spending due to greater output in the economy.

• Quinn-duced increase in consumption

He starred in Caddy Shack, Kingpin, What About Bob, and many others/ gap which results from not enough investment.

• Bill Murray-cessionary Gap

Assume the shift in AD is due to a change in investment of 100 units. Find the value of the simplified multiplier

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