Econ unit 3

Which of the following will cause a rightward shift of the short-run aggregate supply curve?

A decrease in the costs of production

Which of the following is a reason why the aggregate demand curve is downward sloping?

A higher price level decreases real wealth.

Assume the marginal propensity to consume is 0.8. How will a decrease in taxes of $100 billion and a decrease in government spending of $100 billion affect aggregate demand?

Aggregate demand will decrease by $100 billion.

Which of the following changes will necessarily cause inflation?

An increase in aggregate demand and a decrease in short-run aggregate supply.

The movement from point g to point h is best described as which of the following?

An increase in real output due to an increase in the price level

An economy is in long-run macroeconomic equilibrium. What will be the short-run effects of an increase in investment spending?

An increase in real output, a decrease in unemployment, and an increase in the price level

Given the graph of the short-run aggregate supply and long-run aggregate supply curves above, which of the following is true?

At point X, the economy is experiencing a recessionary gap.

Which of the following explains why the long-run aggregate supply curve corresponds to the production possibilities curve?

Both curves illustrate the maximum sustainable capacity.

Which of the following will most likely cause the short-run aggregate supply curve to shift to the left?

Increase in energy prices

Which of the following will result in a rightward shift of the aggregate demand curve?

Increase in exports

Which of the following will remain unchanged when the price level decreases?

Long run aggregate supply

Assume the countries of Ornania and Kumbagi are major trading partners. Ornania is currently in long-run macroeconomic equilibrium. As a result of a recession in its economy, Kumbagi decreases its demand for goods produced in Ornania. Which of the following will occur in Ornania in the short run?

The aggregate demand curve will shift to the left, resulting in a recessionary gap.

In the model, which of the following is true?

The economy is in a recessionary gap when the short-run equilibrium real output is below the long-run equilibrium real output.

The diagram above shows a nation's short-run aggregate supply curve , long-run aggregate supply curve , and aggregate demand curve .

The economy is operating above full employment.

Based on the level of savings and disposable income data in the table above, which of the following must be true?

The marginal propensity to consume is 0.9.

Based on the data on savings and disposable income in the table above, what are the income tax multiplier and the spending multiplier?

The tax multiplier is -9 and the spending multiplier is 10.

A decrease in the price level will produce a movement between which of the following two points on the diagram above?

Y to Z

Which of the following must be true in the long run?

prices and wages are flexible