mcqunit3

Which of the following best describes aggregate supply?

A schedule indicating the level of real output that will be produced at each possible price level

A change in which of the following will cause the aggregate demand curve to shift?

Consumer Wealth

The short-run aggregate supply curve will shift to the right when..

prices of inputs decrease

A rightward shift in the aggregate demand curve with a horizontal aggregate supply curve will cause employment and the price level to change in which of the following ways?

Increase, No change

An increase in the capital stock will cause the…

long-run aggregate supply curve to shift \n rightward.

Which of the following is a fiscal policy that would increase aggregate demand in the Keynesian model?

a decrease in personal income taxes

An increase in labor productivity would most likely cause real gross domestic product and the price level to change in which of the following ways? Real GDP, Price Level

increase, decrease

If Maria Escalera's disposable income increases from $600 to $650 and her level of personal consumption expenditures increase from $480 \n to $520, you may conclude that her marginal propensity to…

consume is 0.8

In the Keynesian aggregate-expenditure model, if the MPC is 0.75 and gross investment increases by $6 billion, equilibrium GDP will increase by

$24 billion

In the Keynesian aggregate-expenditure model, the simple spending multiplier can be calculated by dividing..

the change in real gross domestic product by the initial change in spending.

Which of the following will cause the consumption schedule to shift upward?

An expectation of future shortages of essential consumer goods

The investment demand curve will shift to the right as the result of…

businesses becoming more optimistic with respect to future business conditions.

Automatic stabilizers in the economy include which of the following? I. A progressive personal income tax \n II. Unemployment compensation \n III. Congressional action that increases tax \n rates

I and II only

In order to be called an automatic, or built-in, stabilizer, which of the following must taxes automatically do in a recessionary period and in an inflationary period? \n \n Recessionary Period, Inflationary Period

Decrease, Increase

The balanced-budget multiplier indicates that

equal increases in government spending and taxation will increase total spending.

In which of the following ways will increases in short-run aggregate supply change the price level and unemployment?

Decrease, decrease

Assume the aggregate supply curve is upward sloping and the economy is in a recession. If the government increases both taxes and government spending by $25 billion, the price level and real GDP will most likely change in which of the following ways?

Increase, increase

Which of the following are true statements about total income? (Figure 3.1) \n \n I. Equilibrium total income is $800 billion. \n II. Planned investment is $50 billion. \n III. Equilibrium aggregate expenditure is $600 \n billion.

II and III only

In the graph, if full-employment GDP is $800 billion, the minimum increase in autonomous expenditures that would be required to move total income to full employment income is: (Figure 3.1)

$50 billion

In the graph, the values of the MPC, MPS and simple-expenditure multiplier are: (Figure 3.1)

0\.75, 0.25, 4.0

Which of the following fiscal policy actions would be most effective in combating a recession? \n \n Taxes, Government Spending

$25 billion decrease, $25 billion increase

If the primary goal is to reduce inflation, which of the following fiscal policy actions would be appropriate during a period of a rapidly increasing consumer price index? \n \n I. Reduce government expenditures for \n defense and space research. \n II. Increase transfer payments to those most severely affected by the rising price index. \n III. Increase personal income tax rates.

I and III only

As the average price level decreases, the purchasing power of people's cash balances increases. This results in an increase in spending. This effect is called

the real-balance effect

A severe, sustained increase in oil prices would most likely cause short-run and long-run aggregate supply curves and the production possibilities curve to change in which of the following ways?

Decrease Decrease Shift inward

A decrease in lump-sum personal income taxes will most likely result in an increase in real GDP because which of the following occurs?

II only

A rapid increase in successful research and development projects for the nation will most likely result in which of the following changes in the short-run and the long-run aggregate supply curves and the production possibilities curve?

Increase, Increase, Shift outward

@@If the marginal propensity to consume is two-thirds, then an increase in personal income taxes of $100 will most likely result in@@

a decrease in consumption of $67 and a decrease in savings of $33.

An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the shortrun?

Decrease Decrease Shift inward

One of the reasons the aggregate demand curve is downward sloping is that as the value of cash balances decreases, aggregate spending decreases. This is called

real balances or wealth effect

If there is a decrease in the short-run aggregate supply curve and no changes in monetary and fiscal policies are implemented, the economy over time will

return to the original output and price level.

If there is a decrease in the short-run aggregate supply curve and no changes in monetary and fiscal policies are implemented, the economy over time will

Return to the original output and price level.