İKTİSADA GİRİŞ II - Deneme Sınavı - 13

In most of the developing countries, households have low level of saving. Contrary, the saving rate of households in developed countries is high and, therefore, these savings are used more effectively to finance investment expenditures through well-functioning financial system. Doğru yanıt " C " dir.

The multiplier is a coefficient that can give us to opportunity to calculate how much income will change when there is a shift in aggregate expenditures, stemming from the change in autonomous expenditures. The multiplier value is always greater than 1. The reason for this is that the change in autonomous expenditure leads to an additional change in consumption expenditures. Doğru yanıt " D " dir.

Full employment level of income is the level of income that will be attained in the economy if all the factors of production participate most effectively into the production. This level of income is called potential GDP. Doğru yanıt " E " dir.

The views of the classical model which guarantee full employment equilibrium started to be questioned as a result of the long-term economic stagnation and the associated high unemployment during Great Depression that occurred in the 1930s. The British economist John Maynard Keynes argued that the economic equilibrium, as put forward by Classical economists, does not mean that the level of full employment income is provided at the same time. According to Keynes, equilibrium income can be achieved at the level of underemployment or overemployment. What is important here is the level of aggregate demand.

The correct answer is A.

A - The actual expenditures in the economy are always equal to the income and the production.

B - Aggregate expenditures (AE) are the sum of consumption expenditures (C), investment expenditures (I), government expenditures (G) and net exports (NX).

C - As long as the planned expenditures are equal to GDP, it will not show a tendency to increase or decrease.

D - If the total expenditures are less than GDP, the entire goods and services produced in the economy will not be bought, and the stocks of the firms will start to increase. In this case, firms that cannot sell the goods and services they produce will reduce their production. This decrease in production will lead to a decline in income or GDP.

E - Equilibrium GDP level is the level at which planned aggregate expenditures are equal to the GDP.

The correct answer is B.

In order to achieve equilibrium in the economy, the leakages from income – expenditure flow must be balanced by additions (i.e., injections) to this flow. There are three types of injections for income- expenditure model developed so far: investments, government expenditures, and exports for an open economy.

The correct answer is D.

Saving paradox is the term used to define the case in the question. Saving paradox, in general terms, is the reduction in the consumption expenditures and, therefore, income because of rising savings.

The correct answer is C.

The expenditure multiplier is a coefficient that can give us to opportunity to calculate how much income will change when there is a shift in aggregate expenditures, stemming from the change in autonomous expenditures.

The correct answer is A.

The larger the leakages (in other terms, the lower the marginal propensity to consume), the smaller the value of the multiplier will be. The smaller value of multiplier means that the income generating effect of the same amount initial expenditure increase will also be small.

The correct answer is E.

Full employment level of income is the level of income that will be attained in the economy if all the factors of production participate most effectively into the production. This level of income is called potential GDP.

The correct answer is D.

Inflationary gap is the excess of expenditures when the economy is in equilibrium above the full employment level of income.

The correct answer is B.

An increase in the expenditures in an economy causes the income level to rise. This will take place in real terms up to full employment level and in nominal terms after full employment level. Once the economy reaches potential or full employment income level, it is not possible to increase production in the economy. If expenditures still go on to increase, only the nominal income may increase. Since the nominal income is the multiplication of price level and production amount, price level will increase as far as production amount stays constant.

The correct answer is D.

According to Say’s law, a certain amount of income is generated as a result of the production of goods and services. This income is used again to buy goods and services.

If the production factors want to save money rather than spend a portion of their income, then the all return from productions of the firms will not be expended. Therefore, the quantity demanded for goods and services will be lower than the quantity produced. In case of production or supply surplus, firms will decrease their production and start to lay their workers. This means that the economy diverges from the level of full employment.

According to Keynes, equilibrium income can be achieved at the level of underemployment or overemployment. What is important here is the level of aggregate demand.

Equilibrium is the point on which there is no tendency to leave.

Leakages are the factors that cause autonomous components of aggregate expenditures to reduce.

In order to achieve equilibrium in the economy, the leakages from income – expenditure flow must be balanced by additions (i.e., injections) to this flow. There are three types of injections for income- expenditure model developed so far: investments, government expenditures, and exports for an open economy.

If the sum of leakages is equal to the sum of the injections, the GDP will not change and the equilibrium level of GDP will be reached.

When we increase the autonomous expenditures, which vary independently from the income, we can also increase the equilibrium level of GDP. At this point, you can think that the increase in GDP will be equal to the increase in autonomous spending. However, this increase will have more boosting effect than the increase in autonomous expenditure. In other words, the increase in autonomous expenditures creates additional expenditure in the economy, leading to a larger increase in GDP or equilibrium income.