Unit 3 MC questions
What is the best way to describe the AS curve in the long run?
A. Always vertical in the long run
What will happen to the equilibrium price level and the equilibrium quantity of output if consumer confidence increases? Assume an upward-sloping aggregate supply curve.
C. the equilibrium price level and quantity of output decrease
What will happen to the equilibrium price level and the equilibrium quantity output if the aggregate demand curve shifts to the right? Assume an upward-sloping aggregate supply curve.
C. the equilibrium price level and quantity of output increase
What will happen to the equilibrium price level and the equilibrium quantity of output if a major earthquake destroys much of the plant and equipment on the West Coast? Assume an upward-sloping aggregate supply curve.
A. The equilibrium price level increases while the equilibrium quantity of output decreases
What will happen to the equilibrium price level and the equilibrium quantity of output if the aggregate supply curve shifts to the left? Assume a long run aggregate supply curve.
A. The equilibrium price level increases while the equilibrium quantity of output decreases
Which of the following is true about the consumption function?
A. The slope is equal to the MPC
Equilibrium real GDP is far below full employment, and the government lowers household taxes. Which is likely the result?
A. Unemployment falls with little inflation
Which of the following would NOT shift the aggregate supply curve?
A. an increase in the price level
What will happen to the equilibrium price level and the equilibrium quantity of output if the aggregate supply curve shifts to the left? Assume an upward sloping aggregate supply curve.
A. the equilibrium price level increases while the equilibrium quantity of output decreases
Which of the following events most likely increases real GDP?
An increase in government spending
Stagflation most likely results from...
B. Increasing SRAS with constant AD
Which of the following would NOT shift the aggregate demand curve?
B. a change in technology
Which of the following would shift the aggregate demand curve to the left
B. business firms reduce spending on plant and equipment
Say's Law...
B. is the basis of Classical economic analysis
When disposable income increases by $X....
B. saving increases by less than $X
Using the model of AD and AS, what happens to real GDP, the price level, and unemployment with more consumption spending?
C. REAL GDP PRICE LEVEL UNEMPLOYMENT INCREASES INCREASES DECREASES
Which of the following choices is most likely to create the greatest decrease in real GDP?
C. The government decreases spending with no change in taxes
Recessions...
C. are marked by a sustained decline in output
According to the interest rate effect, aggregate demand slopes downward because lower prices
C. reduce interest rates and therefore increase the quantity demanded in aggregate
The tax multiplier increases in magnitude when...
C. the MPC increases
What is the main contrast between the short run and long run Phillips curve?
D. In the short run there is a negative relationship between inflation and unemployment, and in the long run the relationship is constant
Business cycles...
D. are comprised of a recession and an expansion
Keynes...
D. explained the cause of and cure for the Great Depression
Which of the following is the source of the supply of loanable funds?
E. Savers
An increase in the price level
E. reduces real financial wealth and therefore decreases consumer demand
What will happen to the equilibrium price level and the equilibrium quanity of output if the aggregate demand curve shifts to the right? Assume a long run aggregate supply curve.
E. the equilibrium price level increases while the equilibrium quantity of output remains unchanged
The effect of the spending multiplier is lessened if
E. the price level rises with an increase in aggregate demand
