ECON 102 Sample Test 4

In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is

C) a shift to AD2.

In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is

C) a shift to AD2.

In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?

D) E to I

In the above figure, the shift from point C to point B might be the result of _______

D) a decrease in government expenditures.

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 $17.0 trillion, then it must be the case that

D) aggregate supply has decreased.

In a short-run macroeconomic equilibrium, potential GDP exceeds real GDP. If aggregate demand does not change, then the

D) short-run aggregate supply curve will shift rightward as the money wage rate falls.

In the above table, there are no taxes and no imports or exports. The total level of expenditure in the economy when real GDP is $7,000 is

A) $7,000. B) 0.75. C) $13,500. D) $6,500.

Suppose the price level is fixed. If investment increases by $1 trillion and the aggregate expenditure curve is shown in the figure above, equilibrium expenditure will increase by

A) $3 trillion. B) less than $1 trillion.C) $1 trillion. D) indeterminate from the information given.

In the above figure, autonomous expenditure is equal to

A) $14 trillion. B) $12 trillion. C) $0. D) $16 trillion.

In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is

A) $2,500. B) $2,200. C) $2,300. D) $2,400.

The figure above illustrates an economy's consumption function. What is autonomous consumption in this economy?

A) $6 trillionB) $4 trillionC) $0 D) None of the answers provided is correct.

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?

A) -$26 B) -$5 C) $5 D) $26

In the above figure, the marginal propensity to save equals

A) 0.20. B) 0.90. C) 0.10. D) 0.

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 marginal propensity to consume?

A) 0.25 B) 0.80 C) 0.75 D) 0.20

In the above figure, the marginal propensity to consume equals

A) 0.85. B) 0.80. C) 0.90. D) 0.75.

The value of the multiplier in the economy illustrated in the figure above is

A) 10.0. B) 4.0. C) 2.5. D) 2.0.

In the above figure, when the economy is in a long-run equilibrium, the price level will be

A) 120.

Between 2012 and 2013 real GDP increased by $600 billion and imports increased by $90 billion. Based on these data, the marginal propensity to import equals

A) 6.67. B) 0.90. C) 0.15. D) 0.25.

In the above figure, which part corresponds to a destruction of part of the nation's capital stock?

A) Figure A

An increase in U.S. exports prompted by a rise in foreign incomes represents ________ in the United States.

A) a decrease in autonomous expenditure B) a decrease in induced expenditureC) an increase in autonomous expenditure D) an increase in induced expenditure

When real GDP exceeds aggregate planned expenditure

A) a higher level of equilibrium income will prevail. B) actual inventories decrease below their target. C) the circular flow will increase. D) GDP will decrease.

In the above figure, point A represents

A) a recessionary gap.

Intertemporal substitution means changes in purchases

A) across different stores.C) between imports and exports. B) through time.D) across different goods and services.

The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis.

A) aggregate actual expenditure; real GDP C) real GDP; aggregate planned expenditure B) household expenditures; real GDPD) aggregate planned expenditure; real GDP

Disposable income is equal to

A) aggregate income plus transfer payments.B) aggregate income minus taxes plus government expenditures on goods and services. C) consumption expenditure minus taxes plus transfer payments.D) aggregate income minus taxes plus transfer payments.

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

A) an advance in technology

You observe that unplanned inventories are increasing. You predict that there will be

A) an expansion. B) a business cycle. C) a recession. D) a trough.

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

A) an increase of 600.B) a decrease of $200 because in the long-run, the multiplier is 1. C) a decrease of 600.D) nothing; that is, in the long run real GDP equals $8,000.

In the figure above, negative saving occurs

A) at all levels of disposable income.C) when disposable income is at $20 trillion. B) when disposable income is at $15 trillion. D) when disposable income is at $10 trillion.

Suppose that in a particular economy, the multiplier is equal to 5. In terms of aggregate demand and aggregate supply, this value for the multiplier means that after an increase in investment

A) at each price level, the aggregate supply curve shifts rightward by an amount equal to 5 times the change in investment.B) at each level of real GDP, the aggregate supply curve shifts upward by an amount equal to 5 times the change in investment. C) at each price level, the aggregate demand curve shifts rightward by an amount equal to 5 times the change in investment.D) at each level of real GDP, the aggregate demand curve shifts upward by an amount equal to 5 times the change in investment.

Business cycle turning points are

A) brought about by changes in autonomous expenditures that are then subject to the multiplier effect. B) unaffected by, and unrelated to the multiplier.C) easy to predict.D) None of the answers provided are correct.

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

A) change in the purchasing power of wealth.B) change in the price of foreign goods relative to domestic goods.C) change in the price of current goods relative to future goods. D) Both answers B and C are correct.

In the above figure, a change in autonomous consumption to $4 trillion with no change to the MPC would cause the consumption function to

A) exhibit a parallel shift downward. B) exhibit a parallel shift upward.C) become steeper. D) become flatter.

Which of the following is NOT an autonomous expenditure in the aggregate expenditure model?

A) exports C) government expenditures B) investment D) imports

A monetarist economist believes that

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

Disposable income is

A) income plus transfer payments minus consumption expenditure. B) income minus saving.C) total income divided by the price level.D) income minus taxes plus transfer payments.

Suppose that the slope of the AE curve is 0.67. Then a $100 increase in autonomous spending means equilibrium expenditure will

A) increase by $300. B) decrease by $300.C) decrease by $200. D) increase by $200.

Imports

A) increase the size of the multiplier because imports make disposable income less than real GDP.B) decrease the size of the multiplier because imports lead to an increase in taxes and government purchases.C) decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation. D) increase the size of the multiplier because imports are paid for by exports.

If the price level rises, the purchasing power of wealth

A) increases at first but in the long run decreases.C) increases. B) does not change. D) decreases.

Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.

A) interest rate; zero C) interest rate; $10 B) money wage rate and price level; zero D) money wage rate and price level; $10

In the long run, the multiplier

A) is greater than 1 because of the position and slope of the SAS curve. B) is zero.C) is twice the short-run multiplier.D) depends on the slope of the AD curve.

The size of the multiplier

A) is unaffected by the amount of time that elapses. C) increases in the long run. B) is constant in the long run. D) decreases in the long run.

The figure shows Tropical Isle's aggregate planned expenditure curve. When aggregate planned expenditure is $2 trillion, aggregate planned expenditure is ________ than real GDP, firms' inventories ________, and firms ________ their production.

A) less; decrease; increaseB) greater; decrease; increase C) less; increase; decreaseD) greater; increase; decrease

The slope of the saving function is equal to the

A) marginal propensity to save.B) marginal propensity to consume divided by the marginal propensity to save. C) marginal propensity to save divided by the marginal propensity to consume. D) marginal propensity to consume.

The short-run aggregate supply curve shifts leftward when the

A) money wage rate increases.

In the above figure, the increase in autonomous expenditure moves the economy from point E to

A) point F. B) point G. C) point H. D) point I.

The multiplier effect exists because a change in autonomous expenditure

A) prompts further exports.B) will undergo its complete effect in one round.C) leaves the economy in the form of imports. D) leads to changes in income, which generate further spending.

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; decreases by less than B) falls; decreases by less thanC) rises; equals D) rises; increases by less than

"Dissaving" occurs when

A) saving is negative.B) the consumption function is below the 45-degree line drawn from the origin. C) income exceeds consumption expenditure.D) saving is positive.

A decrease in autonomous consumption will

A) shift the aggregate expenditure function downward. B) decrease the marginal propensity to consume.C) decrease the marginal propensity to save.D) change the slope of the aggregate expenditure curve.

With an increase in the capital stock, the short-run aggregate supply curve

A) shifts rightward.

Any expenditure component that depends on the level of real GDP is called

A) spurious expenditure.C) autonomous expenditure. B) equilibrium expenditure. D) induced expenditure.

The larger the multiplier, the ________ the AE curve and the ________ the AD curve from an increase in investment.

A) steeper; smaller the shift in B) flatter; larger the movement along C) steeper; larger the shift in D) flatter; smaller the movement along

In the above figure, the curve labeled A shifts rightward if

A) taxes decrease.

In the figure above, if income taxes increase,

A) the AE curve becomes steeper.B) there is a movement leftward along the unchanged AE curve. C) the AE curve becomes flatter.D) there is a movement rightward along the unchanged AE curve.

When autonomous expenditure decreases,

A) the AE curve shifts upward.B) the AE curve becomes less steep.C) the AE curve shifts downward. D) there is a movement down along the AE curve.

The aggregate demand curve slopes downward because of

A) the MPC. B) the multiplier.C) wealth and substitution effects. D) import and taxation effects.

Aggregate demand increases when

A) the exchange rate rises.C) interest rates rise. B) foreign incomes fall.D) None of the answers provided are correct.

The smaller the slope of the AE curve,

A) the greater is the value of the multiplier. B) the smaller is the value of the multiplier. C) the smaller is slope of the saving function. D) the steeper is the consumption function.

Autonomous expenditure is not influenced by

A) the price level.C) any other variable. B) real GDP.D) the interest rate.

In the above figure the economy is initially at point A on the aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

A) there is a movement along AE0 to a point such as B. B) there is a movement along AE0 to a point such as C. C) the AE curve shifts downward to a curve such as AE1. D) the AE curve shifts upward to a curve such as AE2.

If the price level increases, the AE curve shifts

A) upward and there is movement along the AD curve. B) downward and the AD curve shifts rightward.C) downward and there is movement along the AD curve. D) upward and the AD curve shifts leftward.

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

A) will not affect the multiplier. B) will make the AE curve flatter. C) will reduce the effect of the multiplier. D) will make the AE curve steeper.

In the above table, savings are positive when disposable income is greater than

A) zero. B) $300. C) $500. D) $100.

In the above figure, at a disposable income level of $2 trillion, saving equals

A) zero.B) $4 trillion.C) consumption expenditure. D) disposable income.

In the figure above, potential GDP equals

B) $18.0 trillion.

In the above figure, the aggregate demand curve is AD2, so the short-run equilibrium level of real GDP is

B) $18.5 trillion.

In the above figure, which movement illustrates the impact of the price level and money wage rate rising at the same rate?

B) E to G

In the above figure, which part corresponds to an increase in the money wage rate?

B) Figure B

If the expected future inflation rate decreases, then

B) aggregate demand decreases.

The above figure illustrates

B) an inflationary gap.

Disposable income ________ when ________.

B) decreases; taxes increase

In the above figure, if aggregate demand does not change, the short-run equilibrium will

B) eventually adjust to a long-run equilibrium with a lower price level.

The long-run aggregate supply (LAS) curve

B) is vertical.

In the above figure, at the point where AD equals SAS

B) real GDP exceeds potential GDP.

If the aggregate demand curve shifts ________ faster than the long-run aggregate supply curve, then ________ occurs.

B) rightward; inflation

In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. Technological advances mean the long-run aggregate supply curve and the short-run aggregate supply curve

B) shift to C and F, respectively.

The data in the above table show that when the price level is 120, if aggregate demand does not change then the

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

Moving along which curve does the money wage rate and the price level change in the same proportions?

B) the LAS curve

The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. With no changes in aggregate demand or long-run aggregate supply, in long-run macroeconomic equilibrium, the price level will be ________ and real GDP will be

C) 100; $600

What could Keynes have meant by his now famous statement, "in the long run we are all dead?"

C) Government intervention in the economy is necessary in times of recession because an economy rarely restores itself to full- employment.

________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic.

C) Monetarist

Which of the following shifts the aggregate demand curve rightward?

C) an increase in investment

Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?

C) an increase in the price of oil that decreases aggregate supply

An economy currently has an inflationary gap. An increase in the money wage rate will ________ the inflationary gap and ________ the price level.

C) decrease; increase

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

C) if the long-run aggregate supply curve is LAS1.

The data in the above table indicate that when the price level is 120

C) inventories rise and the price level falls.

In the above figure, the inflationary gap when AD2 is the aggregate demand curve equals

C) the difference between $18.5 trillion and $18.0 trillion.

Other things constant, the economy's aggregate demand curve shows that

C) the quantity of real GDP demanded decreases when the price level rises.

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

C) the quantity of real GDP demanded decreases.

In the above figure, at the price level of 140 and real GDP of

D) $15 trillion, firms will not be able to sell all their output.

In the above figure, the short-run macroeconomic equilibrium is at the price level ________ and the real GDP level ________.

D) 110; $18.5 trillion

Which of the following statements CORRECTLY describes the policy stance of a macroeconomist?

D) A new classical macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks.

If the quantity of money increases, the

D) AD curve shifts rightward and aggregate demand increases.

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

D) real wealth from the fall in the price level; point c

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

D) rightward shift of the long-run U.S. aggregate supply curve.

The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts ________ and so does the ________ curve.

D) rightward; short-run aggregate supply

In the above figure, B is the current long-run aggregate supply curve and E is the current short-run aggregate supply curve. If there is an increase in the full-employment quantity of labor, then the long-run aggregate supply curve and the short-run aggregate supply curve

D) shift to C and F, respectively.

In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the

D) short-run aggregate supply curve will shift leftward as the money wage rate rises.

A Keynesian economist believes that

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