Econ 102 Final (Midterm 4)

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports and M is imports. All entries are in dollars. What is the equilibrium expenditure?

B) $500

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports and M is imports. All entries are in dollars. What is the level of aggregate planned expenditure when real GDP is equal to $900 billion?

B) $796

The expenditure multiplier equals

B) 1/(1 - slope of AE curve)

In an economy with no income taxes or imports, the multiplier equals

B) 1/MPS

Equilibrium expenditure occurs where the aggregate expenditure curve crosses the

B) 45-degree line.

____ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment.

B) Keynesian

In the above figure, as the economy adjusts toward equilibrium, the

B) SAS curve will shift leftward

Suppose there is an increase in short-run aggregate supply with no change in long-run aggregate supply. This situation could be the result of

B) a decrease in the money wage rate.

People expect their incomes will decrease next year. As a result, the ___ will shift ____.

B) aggregate demand curve; leftward

Which of the following does NOT shift the aggregate demand curve?

B) an increase in the price level

Which of the following changes does NOT shift the short-run aggregate supply curve?

B) an increase in the price level.

The country of Mu has continuous strong economic growth and a steady price level. This situation is most likely the result of aggregate demand growing ____ aggregate supply.

B) at the same pace as long-run

The intertemporal substitution effect of a change in the price level results from a

B) change in the price of current goods relative to future goods.

A decrease in foreign incomes

B) decreases aggregate demand in the United States.

The size of the multiplier

B) decreases in the long run.

If investment decreases, the AE curve shifts

B) downward and the AD curve shifts leftward.

Because of the multiplier, a one-time change in expenditure will

B) generate more additional real GDP than the initial change in expenditure.

In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. A recessionary gap exists

B) if the long-run aggregate supply curve is LAS3.

The multiplier effect is smallest

B) in the long run

In the short run, a rightward shift of the short-run aggregate supply curve ____ real GDP and ____ the price level.

B) increases; lowers

Induced expenditure includes ____.

B) induced consumption expenditure and imports.

The government increases its expenditures. The steeper the SAS curve, the _____ will be the increase in the price level and the ____ will be the increase in real GDP.

B) larger; smaller

In the above figure, the economy is at point A when the money wage rate and the price level both fall by 10 percent. Firms will be willing to supply output equal to

B) less than $13.0 trillion

In the short run, an increase in aggregate demand

B) raises the price level and increases real GDP.

Short-run equilibrium occurs at the intersection of

B) the SAS and AD curves.

A monetarist economist believes that

B) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.

1 - MPC equals

B) the marginal propensity to save.

Based on the data in the table above, in the adjustment towards the long-run equilibrium

B) the short-run aggregate supply curve will shift rightward.

In the above figure, equilibrium expenditure is

A) $12 trillion

In the above figure, real GDP at full employment is

A) $13 trillion

Suppose that the slope of the AE curve is 0.80. Then an increase of investment of $10 billion leads to an increase in equilibrium real GDP equal to

A) $50.0 billion

If investment increases by $300 and, in response, equilibrium aggregate expenditure increases by $600, the multiplier is

A) 2

There are several reasons why the aggregate demand curve is downward sloping. Which of the following correctly describes one of these explanations?

A) A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports.

Suppose there is a temporary increase in the price of oil. This is represented by

A) a leftward shift of the SAS curve.

Disposable income is equal to

A) aggregate income minus taxes plus transfer payments

In the above figure, point C represents

A) an inflationary gap

The data in the above table indicate that when the price level is 100,

A) firms have unexpectedly low inventories, so prices will rise.

The marginal propensity to consume is the

A) fraction of a change in disposable income spent on consumption expenditure.

The multiplier measures the

A) horizontal shift in the aggregate demand curve from an increase in autonomous spending.

The U.S. exchange rate rises. As a result, there is

A) leftward shift in the U.S. aggregate demand curve.

The curve labeled A in the above figure is a

A) long-run aggregate supply curve.

Which school of thought believes that recessions are the result of inappropriate monetary policy?

A) monetarist

If the marginal propensity to import increases, then the

A) multiplier will decrease in value.

In an economy, the multiplier is 3. If government expenditure increases by $1 million, then in the short run, the price level ____ and real GDP _____ $3 million.

A) rises; increases by less than

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

A) the individual's real wealth and consumption expenditure decrease.

The aggregate demand curve illustrates that, as the price level rises,

A) the quantity of real GDP demanded decreases.

After an increase in autonomous spending, in the long run, changes in the price level

A) will reduce the effect of the multiplier

In the above table, there are no taxes and no imports or exports. The equilibrium level of expenditure for this economy is

C) $5,000

In the above figure, autonomous expenditure is

C) $8 trillion

Equilibrium real GDP is $400 billion, the MPC = 0.9 and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

C) $800 billion

If there are no income taxes or imports, the multiplier equals

C) 1/(1 - marginal propensity to consume)

In 2009, just after taking office, president Obama approved an $800 billion stimulus package of tax cuts and increased government spending to combat the recession brought on by the financial crisis of 2007. Which group of economists most approved of president Obama's actions?

C) Keynesian economists

Assume the economy is at long run equilibrium and oil prices rise. As a result, the ____ shifts ____.

C) SAS; leftward

With a steep short-run aggregate supply curve,

C) an increase in taxes that does not change potential GDP will not decrease real GDP by much.

Where the consumption function crosses the 45th line

C) consumption expenditure equals disposable income.

The consumption function relates consumption expenditure to

C) disposable income.

The marginal propensity to import is the ____ that is spent on imports.

C) fraction of an increase in real GDP.

A Keynesian economist believes that

C) if the economy was left alone, it would rarely operate at full employment.

A decrease in government expenditure shifts the AD curve ____ and a decrease in taxes shifts the AD curve ____.

C) leftward; rightward

The quantity of real GDP demanded equals $12.4 trillion when the price level is 95. If the price level falls to 90, the quantity of real GDP demanded equals

C) more than $12.4 trillion

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

C) people substitute toward more imported goods and services.

The short-run aggregate supply curve is upward sloping because in the short run the

C) price level changes but the money wage rate does not.

The long-run aggregate supply curve illustrates the

C) relationship of the price level and real GDP when the economy is at full employment.

If taxes are increased, the AD curve

C) shifts leftward and aggregate demand decreases.

The short-run aggregate supply curve

C) shows the impact changes in the price level have on the quantity of real GDP when resource prices are constant.

If an increase in a household's disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

C) slope of the consumption function is 0.5.

A classical economist believes that

C) the economy is self-regulating and always at full employment.

If disposable income increases,

C) there is a movement upward along the consumption function

In the above table, C is consumption expenditure, I is investment, G is government expenditure, X is exports and M is imports. All entries are in dollars. What is the unplanned inventory change when GDP is equal to $400?

D) -$26

In the above figure, an increase in autonomous expenditure is depicted by the movement from point E to

D) Point F

Which of the following changes does NOT shift the long-run aggregate supply curve?

D) a fall in the price level

In the above figure, the short-run aggregate supply curve is SAS1. If technology advances, there is

D) a shift to SAS2.

In the above figure, the economy is at point A when changes occur. If the new equilibrium has a price level of 120 and real GDP of $12.0 trillion, then it must be the case that

D) aggregate supply has decreased.

When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is

D) all of the above answers are correct

Which of the following events will increase short-run aggregate supply?

D) an advance in technology

There is a movement along the consumption function if there is ____.

D) an increase in disposable income.

The graph of the consumption function has consumption expenditure on the vertical axis and

D) disposable income on the horizontal axis.

In the above figure, if the economy is at point a, an increase in ____ will move the economy to ____.

D) expected future income; point b

The positive relationship between short-run aggregate supply and the price level indicates that, in the short-run,

D) firms produce more output as the price level rises.

Aggregate demand increases if the quantity of money ____.

D) increases or tax rates decrease.

In the above figure, at point d firms would find themselves with inventories ____ their target level and so would ____ production.

D) increasing above; decrease

In long-run macro equilibrium, the

D) none of the above answers is correct.

The short-run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price level is equal to 100. Suppose that government expenditure decreases by $200. The long-run effect of the decrease in government expenditure changes real GDP by

D) nothing; that is, in the long run real GDP equals $8,000.

Autonomous expenditure is not influenced by

D) real GDP

If the economy is at long run equilibrium then

D) real GDP equals potential GDP.

According to the intertemporal substitution effect, when the price level increases, the interest rate

D) rises and the quantity of real GDP demanded decreases.

A fall in the money wage rate shifts

D) the SAS curve rightward but leaves the LAS curve unchanged.

Moving along the short-run aggregate supply curve, ____.

D) the money wage rate, the prices of other resources, and potential GDP remain constant.

The supply of real GDP is a function of

D) the quantities of labor, capital and the state of technology.

In the aggregate expenditure model, when real GDP is greater than aggregate planned expenditure,

D) unplanned inventories are being accumulated.