macro test 3

False

A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract.

Supply to increase

A fall in labor costs will cause aggregate:

Rightward shift in the economy's aggregate demand curve

An expansionary fiscal policy is shown as a:

Increase (or shift right) in aggregate demand now

An expected increase in the prices of consumer goods in the near future will:

leftward shift of the AS curve

Graphically, cost-push inflation is shown as a:

Consume is .75

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

Increased borrowing by the government

Crowding out is a decrease in private investment caused by:

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

Discretionary fiscal policy refers to:

Decreases and tax revenues increase

Due to automatic stabilizers, when the nation's total income rises, government transfer spending:

APC+APS=1

which of the following is correct?

$6 billion

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Decrease aggregate demand and increase aggregate supply.

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

Foreign buyers will find U.S. goods become more expensive

If the dollar appreciates relative to foreign currencies, then:

True

If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending

profits are highly variable

Investment spending tends to be unstable because:

specific level of total income that is consumed

The APC can be defined as the fraction of a:

the amounts households intend to consume at various possible levels of aggregate income.

The consumption schedule shows:

Real GDP

The goal of expansionary fiscal policy is to increase:

The real interest rate and investment

The investment demand curve portrays an inverse (negative) relationship between

Level of income

The most important determinant of consumption and saving is the:

an increase in investment can cause GDP to change by a larger amount.

The multiplier effect means that:

change in GDP/initial change in spending

The multiplier is defined as:

change in GDP resulting from a change in spending

The multiplier is useful in determining the:

1/MPS

The multiplier is:

Magnifies initial changes in spending into larger changes in GDP

The practical significance of the multiplier is that it:

Wages tend to be inflexible downward

Wage contracts, efficiency wage, and the minimum wage are explanations for why:

lower expected rates of return on investment

Which of the following would decrease investment demand?

A decrease in wealth

Which of the following would shift the saving schedule upward?

the APC rises and the APS falls

if there is a decrease in disposable income in an economy, then: