Unit 3 MC questions

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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


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