System Assignment Worksheet

Question 1:

Assume Smith is temporarily unemployed because he has voluntarily quit his job with Company A and will begin a better job next week with Company B. Smith will be counted as structurally unemployed.

(a) True
(b) False

Question 2:

A recession is a decline in total output, employment, and income, and is marked by a widespread contraction in many industries.

(a) True
(b) False

Question 3:

The purchase of GM stock is a part of gross, but not of net, investment.

(a) True
(b) False

Question 4:

The CPI measures the change in the average price of goods produced domestically.

(a) True
(b) False

Question 5:

In a simple two sector model of the economy the slope of the aggregrate expenditure function is the APC (average propensity to consume).

(a) True
(b) False

Question 6:

The "recessionary gap" is the amount by which the equilibrium national income exceeds the full-employment income differ.

(a) True
(b) False

Question 7:

A decrease in the interest rate will tend to shift the investment schedule to the left.

(a) True
(b) False

Question 8:

Using the table below calculate the missing values.

Enter the missing values: the inflation/growth rates as indicated below.

Inflation rate year 1-2 ____________

Real growth rate yr. 2-3 ____________

Inflation rate year 3-4 ____________

Real growth rate yr. 4-5 ____________

Question 9:

Use the information below to answer the following questions for a two sector economy:

C = 650 + 0.6 Y
I = 40

where: C is consumption
I is investment
Y is Income
AE is aggregate expenditure
Ye is Equilibrium income

The value of consumption when Y=500 is?
What is the value of Ye?
What is the value of the multiplier?
The value of savings when Y=400 is?
What is the value of AE when Y=200?

Question 10:

Using the consumption function below, calculate consumption and savings at each level of income and find break-even income.

Where Y=national product or income
C = 470 + 0.55 Y

What is the break-even level of Income?

Question 11:

Complete the following table assuming that (a) MPS = 0.7, (b) there is no government and all saving is personal saving. (mps=marginal propensity to save)

Level of output and income Consumption in Saving in

(a) What is the MPC?

(b) What is the Autonomous Consumption?

Suppose a family's annual disposable income is 5,000 of which it saves 2,700

(c) What is their APC?

(d) If their income rises to 6,500 and they plan to save 3,200, what are their MPS and MPC?