ap macro unit 3 new

The intersection of the aggregate demand and aggregate supply curve occurs at the economy's equilibrium level of

E. Real domestic output and the price level

An increase in consumer spending will most likely cause the price level and real GDP to change in which of the following ways in the short-run?

A. Increase / increase

An decrease in the wages and production cost will most likely cause the price level and real GDP to change in which of the following ways in the short-run?

D. Decrease / increase

An negative supply shock would most likely result in

C. A decrease in national income

A positive supply shock, such as a decrease in the price of oil, is most likely to have which of the following short-run effects on the price level and output?

D. Decrease / Increase

If exports from the United States increased, what would most likely happen to real gross domestic product and price level?

B. Increase/ Increase

Stagflation might be caused by

C. Increase in the price of raw materials

Which of the following would cause a leftward shift in aggregate demand?
I. Congress increases personal income taxes

II. An increase in government spending on public goods
III. A recession in another country that is a close trading partner

D. I and III only

Which of the following would cause a rightward shift of the aggregate supply curve?

D. Inflationary expectations

The formula to calculate the expenditures or simple multiplier is

C. 1/1-MPC

If an increase in government spending of $100 billion increases equilibrium output by a total of $500 billion, then the marginal propensity to consume must be at least

D. .8

If Congress wants to close a recessionary gap, which policy is matched to the change in policy, output and price level?

E. Decrease Taxes / Increase / Increase

If Congress wants to close an inflationary gap, which policy is matched to the change in policy, output and price level?

A. Decrease Spending / Decrease / Decrease

How will a decrease in personal income taxes and an increase in government spending affect consumer spending and unemployment in the short-run?

B. Increase / Increase

The income that households have after taxes is called

A. Disposable income

If the economy is operating in the intermediate range of the aggregate supply curve and if aggregate demand increases due to an increase in net exports, then the price level, output, & the unemployment rate are most likely to change in which of the following ways?

B. Increase / increase / decrease

An important assumption in Keynesian theory is that

A. Prices are rigid downward and decreases in aggregate demand will lead to an increase in unemployment.

Suppose that from 2014 to 2015, unemployment fell from 7.2 to 5.6% and inflation fell from 2.17 to 1.1%. An explanation of these changes might be that the

D. The aggregate supply curve shifted to the right

The value of the simple spending multiplier decreases when

E. The marginal propensity to save increases

A major advantage of automatic stabilizers in fiscal policy is that they

D. Go into effect without passage of new legislation

If, at full employment, the government wants to increase its spending by $200 billion without increasing inflation in the short run, it must do which of the following?

A. Raise taxes by more than $200 billion

If government expenditures and taxes are increased by the same amount, which of the following will occur?

D. Aggregate demand will increase