MACRO FINAL - Mundy

If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is A - 0.9. B - 0.8. C - 0.75. D - 0.6.

A - 0.9

New classical macroeconomic theory emphasizes the role of "sticky" prices in the economy. T/F?

false

If national income increases by $20 million and consumption increases by $5 million, the marginal propensity to consume is 4. 0.75. 0.5. 0.25.

0.25

Inventories refer to A - goods that have been produced but not yet sold. B - goods which have been presold before they are produced. C - goods that have been planned but not yet produced. D - goods that have been produced and sold in the same year.

A - goods that have been produced but not yet sold.

All of the following are components of aggregate expenditure except A - actual investment spending. B - consumption spending. C - government spending. D - net export spending.

A -actual investment spending.

An increase in aggregate demand results in a(n) ________ in the ________. A expansion; short run B recession; long run C expansion; long run D recession; short run

A expansion; short run

A decrease in aggregate demand results in a(n) ________ in the ________. A recession; short run B expansion; long run C expansion; short run D recession; long run

A recession; short run

Which of the following leads to an increase in real GDP? A - a decrease in the inflation rate in other countries relative to the inflation rate in the United States B - a decrease in interest rates C - a decrease in government spending D - Households have increasingly pessimistic expectations about future income.

B - a decrease in interest rates

The ________ shows the relationship between the price level and quantity of real GDP demanded. A - consumer price index B - aggregate demand curve C - 45-degree line D - aggregate expenditure line

B - aggregate demand curve

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by A - investment spending. B - the level of aggregate expenditure. C - government spending. D - export spending.

B - the level of aggregate expenditure.

Potential GDP refers to the level of A nominal GDP in the short run. B real GDP in the long run. C real GDP in the short run. D nominal GDP in the long run.

B real GDP in the long run.

How does a decrease in government spending affect the aggregate expenditure line? A - It shifts the aggregate expenditure line upward. B - It decreases the slope of the aggregate expenditure line. C - It shifts the aggregate expenditure line downward. D - It increases the slope of the aggregate expenditure line.

C - It shifts the aggregate expenditure line downward.

All of the following would be considered a positive addition to household wealth except A - the balance in your savings account. B - 500 shares of Google stock. C - a credit card balance. D - the equity in one's home.

C - a credit card balance.

If inventories decline by more than analysts predict they will decline, this implies that A - actual investment spending was greater than planned investment spending. B - actual investment spending was equal to than planned investment spending. C - actual investment spending was less than planned investment spending. D - there is no relationship between actual investment spending and planned investment spending.

C - actual investment spending was less than planned investment spending.

An increase in the price level results in a(n) ________ in the quantity of real GDP demanded because ________. A - decrease; a higher price level increases consumption, investment, and net exports. B - increase; a higher price level increases consumption, investment, and net exports. C - decrease; a higher price level reduces consumption, investment, and net exports. D - increase; a higher price level reduces consumption, investment, and net exports.

C - decrease; a higher price level reduces consumption, investment, and net exports.

When the economy enters into a recession, your employer is ________ to reduce your wages because ________. A - unlikely; lower wages reduce productivity and morale B - likely; aggregate demand is vertical in the long run C - unlikely; output and input prices generally fall during recession D - likely; output prices always fall during recession

C - unlikely; output and input prices generally fall during recession

What is potential GDP? A It is the difference between current GDP and maximum GDP. B It is the level of real GDP in the short run. C It is the level of real GDP in the long run. D It is the level of GDP at which inflation is constant.

C It is the level of real GDP in the long run.

Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve? A They will move the economy down along a stationary aggregate demand curve. B They will move the economy up along a stationary aggregate demand curve. C They will shift the aggregate demand curve to the right. D They will shift the aggregate demand curve to the left.

C They will shift the aggregate demand curve to the right.

The marginal propensity to save is defined as A. the change in disposable income divided by the change in saving. B. saving divided by disposable income. C. the change in saving divided by the change in disposable income. D. disposable income divided by saving.

C. the change in saving divided by the change in disposable income.

Table 23-3 Consumption (dollars) Disposable Income (dollars) $1,200 $3,000 2,100 4,000 3,000 5,000 Refer to Table 23-3. Given the consumption schedule in the table above, the marginal propensity to consume is A - 0.1. B - 0.3. C - 0.6. D - 0.9.

D - 0.9

Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run? A - Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. B - Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. C - Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise. D - Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.

D - Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.

A decrease in Social Security payments will A - decrease investment spending. B - decrease government spending. C - decrease export spending. D - decrease consumption spending.

D - decrease consumption spending.

The five most important variables that determine the level of consumption are A - government purchases, saving account balances, wealth, interest rates, portfolio balances. B - government purchases, interest rates, income, taxes, and transfers. C - wealth, savings account balances, checking account balances, stock portfolio balances, and bond portfolio balances. D - disposable income, wealth, expected future income, price level, and interest rate.

D - disposable income, wealth, expected future income, price level, and interest rate.

Which of the following models relies on emphasizing the importance of sticky wages and prices? the new Keynesian model the real business cycle model the monetarist model the new classical model

the new Keynesian model