Chapter 9

If the marginal propensity to save is 0.5 and new spending is $200, then total spending will increase by:

$400. Recall that the spending multiplier is determined by dividing 1 by the marginal propensity to save. Then, to calculate the total spending increase, the amount of new spending ($200) by the multiplier (1/MPS). $200 × (1/0.5) = $200 × 2 = $400.

If the marginal propensity to consume is 0.7, then the marginal propensity to save is:

0.3.

If the marginal propensity to consume is 0.7, then the marginal propensity to save is:

0.3. The marginal propensities to save and to consume add up to 1. 0.7 + 0.3 = 1

If the marginal propensity to save is 0.5, then the marginal propensity to consume is:

0.5

If the marginal propensity to save is 0.5, then the marginal propensity to consume is:

0.5. The marginal propensities to save and to consume add up to 1. 0.5 + 0.5 = 1

What is the spending multiplier if the marginal propensity to consume is 0.75

4

What is the spending multiplier if the marginal propensity to save is 0.2?

5

As a result of the wealth, purchasing power decreases when the aggregate price level increases. This would be shown as

A movement up and to the left along the same aggregate demand curve.

Rising inflationary expectations can cause

A shift to hr left of the entire short-run aggregate supply curve

The effect of an increase in government spending on the economy can be shown as:

A shift to the right of the entire aggregate demand curve

Which of the following will cause the aggregate demand curve to shift to the left

An increase in household debt

The aggregate demand curve is downward sloping due to the:

Effect of prices on household purchasing power

In the short run, ceteris paribus, what happens to the output when price level increases?

It increases

If the expected rate of return on investment falls, how would aggregate demand be affected?

It would cause the aggregate demand curve to shift to the left.

How would an increase in government spending affect aggregate demand?

It would cause the aggregate demand curve to shift to the right

If the expected rate of return on investment increases, how would aggregate demand be affected?

It would cause the aggregate demand curve to shift to the right.

Suppose the cost of labor were to increase. How would that affect short-run aggregate supply? Please choose the correct answer from the following choices, and then select the submit answer button.

It would cause the short-run aggregate supply curve to shift to the left. Factors that decrease short-run aggregate supply at any given price level will cause the short-run aggregate supply curve to shift to the left.

In 2011, analysts were predicting increases in the aggregate price level in India. How would this affect exports from India? Please choose the correct answer from the following choices, and then select the submit answer button.

Its exports would decrease

What occurs at macroeconomic equilibrium

The economic neither contracts nor expands

What occurs at macroeconomic equilibrium?

The economy neither contracts nor expands.

What occurs at macroeconomic equilibrium?

The economy neither contracts nor expands. The economy neither contracts nor expands at macroeconomic equilibrium.

Which of the following is a true statement?

When the aggregate price level decreases, this causes net exports to increase.

Which of the following is a true statement?

When the aggregate price level increases, this causes net exports to fall.

Which of the following will cause a movement up along the aggregate demand curve in the United States?

a decrease in exports brought about by a higher price level

Which of the following will cause a movement up along the aggregate demand curve?

a decrease in exports brought about by a higher price level

Which of the following will cause a movement up along the aggregate demand curve?

a decrease in household purchasing power brought about by a higher price level

How would an increase in short-run aggregate supply with no corresponding change in aggregate price level be illustrated?

a different aggregate supply curve to the right of the original curve

What shape is the aggregate demand curve?

a downward-sloping line

Demand-pull inflation occurs when _____ expands so much that equilibrium output exceeds full employment output and the price level rises.

aggregate demand Demand-pull inflation occurs when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises.

The aggregate demand curve is downward sloping due to the:

effect of prices on household purchasing power.

The aggregate demand curve is downward sloping due to the:

effect of prices on the competitiveness of a country's exports.

Which of the following had the greatest percentage decrease from 1929 to 1932?

investment

In the short run, ceteris paribus, what happens to output when the price level decreases

it decreases

What likely happens to short-run aggregate supply when industries become more concentrated

it would cause the short-run aggregate supply curve to shift to the left

Suppose that the spending multiplier is 4 and the economy has unemployed resources and excess capacity. If spending increases and the economy moves to an equilibrium above full employment, then the change in output will be:

less than four times the change in spending

If the economy is at both short-run and long-run macroeconomic equilibrium, then:

neither the price level nor GDP will change. The economy neither contracts nor expands at macroeconomic equilibrium; there are therefore no changes in the price level or GDP.

According to the following diagram, which of the following shifts indicate a government's reducing government spending to combat demand-pull inflation?

point a to point e The shift from point a to point e indicates the shift in aggregate demand that would occur if a government reduced spending to combat demand-pull inflation.

When the aggregate price level increases, this causes interest rates to:

rise. As aggregate prices rise, people need more money to buy things, and this will increase the cost of borrowing money.

Economic growth is illustrated by a:

shift of the long-run aggregate supply curve to the right.

In the long run, improvements in productivity will:

shift the long-run aggregate supply curve to the right.

An increase in the number of monopoly firms and a decrease in the number of competitive firms would cause the ____ curve to shift to the _____.

short-run aggregate supply; left

Increased taxes and regulation would cause the _____ curve to shift to the _____.

short-run aggregate supply; left

A decrease in the number of monopoly firms and an increase in the number of competitive firms would cause the _____ curve to shift to the _____.

short-run aggregate supply; right

If productivity increases, this would cause the _____ curve to shift to the _____.

short-run aggregate supply; right

Improving technology will cause the _____ curve to shift to the _____.

short-run aggregate supply; right

The _____-run aggregate supply curve is _____sloped.

short; positively

The short-run aggregate supply curve is upward sloping due to the:

slow change of some input costs. The slow change of some input costs is the reason the aggregate supply curve is positively sloped.

The short-run aggregate supply curve is upward-sloping due to the:

slow change of some input costs. The slow change of some input costs is the reason the aggregate supply curve is positively sloped.

Aggregate demand is

the output of goods and services demanded at different price levels.

The long-run aggregate supply curve is _____ at full employment.

vertical In the short run, input costs are sticky, but in the long run, they can adjust and the economy reaches its capacity to produce.