unit 3 review Mult. choice
e
A decrease in business taxes would lead to an increase in national income by increasing which of the following? A) The money supply B) Unemployment C) Aggregate demand only D) Aggregate supply only E) Both aggregate demand and aggregate supply
e
A high marginal propensity to consume implies which of the following? A) A small change in consumption when income changes B) A high savings rate C) A high marginal tax rate D) An equilibrium level of income near full employment E) A low marginal propensity to save
b
A short-run Phillips curve shows an inverse relationship between A) interest rates and borrowing B) inflation and unemployment C) income and consumption D) prices and quantity demanded E) inputs and outputs
e
According to the long-run Phillips curve, which of the following is true? A) Unemployment increases with an increase in inflation. B) Unemployment decreases with an increase in inflation. C) Increased automation will lead to lower levels of structural unemployment in the long run. D) Changes in the composition of the overall demand for labor tend to be deflationary in the long run. E) The natural rate of unemployment is independent of monetary and fiscal policy changes that affect aggregate demand.
a
According to the short-run Phillips curve, lower inflation rates are associated with A) higher unemployment rates B) higher government spending C) larger budget deficits D) greater labor-force participation rates E) smaller labor-force participation rates
c
All of the following changes will shift the investment demand curve to the right EXCEPT A) a decrease in the corporate income tax rate B) an increase in the productivity of new capital goods C) an increase in the real interest rate D) an increase in corporate profits E) an increase in real gross domestic product
E
An advance in technology will cause the A) aggregate demand curve to shift to the right B) aggregate demand curve to shift to the left C) short-run aggregate supply curve to shift to the left D) long-run aggregate supply curve to shift to the left E) long-run aggregate supply curve to shift to the right
a
An increase in aggregate demand will cause which of the following? A) A movement along a given short-run Phillips curve B) The long-run Phillips curve to become horizontal C) The short-run Phillips curve to shift to the left D) The long-run Phillips curve to shift to the right E) The long-run Phillips curve to shift to the left
d
An increase in consumer confidence will result in which of the following in the short run? A)A rightward shift of the long-run aggregate supply curve B)A rightward shift of the short-run aggregate supply curve C)A leftward shift of the short-run aggregate supply curve D) A rightward shift of the aggregate demand curve E) A leftward shift of the aggregate demand curve
D
An increase in which of the following will increase the value of the spending multiplier? A) The supply of money B) Equilibrium output C) Personal income tax rates D) The marginal propensity to consume E) The required reserve ratio
c
An inflationary gap could be reduced by A) an increase in government spending B) an increase in the supply of money C) an increase in the income tax rate D) a decrease in the discount rate E) a decrease in the reserve requirement
c
As a component of aggregate demand, investment refers to the A) purchase of raw land for later resale B) purchase of stocks and bonds C) purchase of new equipment and additional inventories D) difference between people's income and spending E) dividends paid out to shareholders
b
Assume that Jane's marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36,000 from her disposable income of $40,000. If her disposable income in 2005 increased to $50,000, her consumption spending increased by A) $4,000 B) $8,000 C) $9,000 D) $10,000 E) $14,000
d
If a reduction in aggregate supply is followed by an increase in aggregate demand, which of the following will definitely occur? A) Output will increase. B) Output will decrease. C) Output will not change. D) The price level will increase. E) The price level will decrease.
b
If the government increases expenditures on goods and services and increases taxation by the same amount, which of the following will occur? A) Aggregate demand will be unchanged. B) Aggregate demand will increase. C) Interest rates will decrease. D) The money supply will decrease. E) The money supply will increase.
c
If there is an inflationary gap, which of the following changes will move the economy back toward full employment? A) An increase in investment spending B) An increase in government spending C) An increase in taxes D) An increase in exports E) An increase in transfer payments
d
If wages are sticky, which of the following policies will be the most effective in raising real gross domestic product to the full-employment level? A) Doing nothing, since there are automatic stabilizers B) The sale of bonds by the Federal Reserve C) An increase in the income tax D) An increase in government spending E) An increase in the discount rate
a
If, at full employment, the government wants to increase its spending by $100 billion without increasing inflation in the short run, it must do which of the following? A) Raise taxes by more than $100 billion. B) Raise taxes by $100 billion. C) Raise taxes by less than $100 billion. D) Lower taxes by $100 billion. E) Lower taxes by less than $100 billion.
c
In the short run, cost-push inflation can be caused by A) printing too much money B) increased government spending C) negative supply shocks D) decreased tariffs E) decreased taxes
d
Suppose that, from 1985 to 1986, unemployment fell from 7.2 to 7.0 percent and inflation fell from 3.8 to 1.1 percent. An explanation of these changes might be that the A) aggregate demand curve shifted to the left B) aggregate demand curve shifted to the right C) aggregate supply curve shifted to the left D) aggregate supply curve shifted to the right E) short-run Phillips curve shifted to the right
b
Which of the following could cause a movement along a country's short-run Phillips curve toward higher unemployment and lower inflation? A) A significant reduction in energy prices B) A recession in the economies of the nation's major trading partners C) A decrease in savings by the country's consumers D) A movement of the economy from the recovery phase to the expansionary phase of the business cycle E) An improvement in technology
C
Which of the following explains why the long-run aggregate supply curve corresponds to the production possibilities curve? A) Both curves are downward sloping. B) Both curves illustrate flexible wages and prices. C) Both curves illustrate the maximum sustainable capacity. D) Both curves illustrate the trade-off between inflation and unemployment. E) Both curves illustrate short-run macroeconomic equilibrium.
b
Which of the following is an example of an automatic stabilizer? A)Discretionary fiscal policy B) Progressive income taxes C) Autonomous consumption D) The spending multiplier E) Cyclical unemployment
b
Which of the following is implied by a long-run Phillips curve? A) Wages are sticky. B) There is no trade-off between unemployment and inflation. C) The long-run aggregate supply curve is upward-sloping. D) Expected inflation exceeds actual inflation. E) The unemployment rate falls with higher inflation.
b
Which of the following relationships is illustrated by a short-run Phillips curve? A) A decrease in the rate of inflation is accompanied by an increase in the rate of economic growth. B) A decrease in the rate of inflation is accompanied by an increase in the rate of unemployment. C) An increase in the rate of inflation is accompanied by a decrease in the rate of economic growth. D) An increase in the rate of inflation is accompanied by an increase in the rate of unemployment. E) A decrease in the rate of economic growth is accompanied by a decrease in the rate of unemployment.
b
Which of the following will result in a rightward shift of the aggregate demand curve? A) An increase in the income tax rate B) An increase in exports C) A decrease in the price level D) A decrease in household income E) A decrease in government spending
e
Which of the following would cause the short-run aggregate supply curve to shift to the right? A) An increase in the wage rate B) An increase in the interest rate C) An increase in the natural rate of unemployment D) A decrease in the capital stock E) A decrease in the expected price level
c
Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve? A) An increase in interest rates B) A tax increase of 50 cents per gallon for gasoline C) An across-the-board reduction of wages in the manufacturing sector D) The passage of legislation mandating a reduction in automobile pollution E) The shutdown of plants and movement of production of goods abroad
b
a short run phillips curve shows: A) interest rate and borrowing B) inflation and unemployment C) income and consumption D) prices and quantity demanded E) inputs and outputs
d
an appropriate fiscal policy to combat a recession would be to increase which of the following a) interest rates b) money supply c) taxes d) gov spending e) sale of gov bonds
e
an increase in aggregate supply will most likely cause income and employment to change in the following ways: A) decrease, decrease B) decrease, increase C) no change, increase D) increase, no change E) increase, increase
c
crowding out refers to the decrease in A) national output caused by higher taxes B) domestic production caused by increased imports C) private investment due to increased by borrowing from the gov D) employment caused by higher inflation E) exports caused by an appreciating currency of a country
b
if the real interest rate in the US increases relative to that of the rest of the world, the capital should flow: A) into US and dollar will depreciate B) into US and dollar will appreciate C) out of US and dollar will depreciate D) out of US and dollar will appreciate E) out of US and value of the dollar will not change
a
in an economy where all of the prices including wages are completely flexible, an increase in labor productivity will result in which of the following changes in output and real wages: A) increase, increase B) increase, decrease C) decrease, no change D) decrease, increase E) decrease, decrease
d
stagflation is most likely to be caused by A) increase in AG demand B) decrease in AG demand C) increase in AG supply D) decrease in AG supply E) a large increase in money supply
a
when the average price level increases by 10 percent in a given year, which of the following must increase by 10 percent for real output to remain constant: A) real national income B) nominal national income C) the international value of the currency D) real interest rates E) nominal interest rates
d
which of the following can be expected to cause an increase in GDP in the short run A) an increase in tax rate B) an increase in interest rate C) equal increases in both imports and exports D) equal increases in both taxes and government expenditures E) equal decreases in both investments and gov expenditures
b
which of the following would indicate that economic growth has occurred A) PPC curve shifts to left B) Long run AG supply shifts to right C) AG demand curve shifts to right D) Phillips curve goes flat E) Business cycles do not exist
