Econ 102 exam 4
In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is
a shift to AD2
In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is
a shift to AD2
If the expected future inflation rate decreases, then
aggregate demand decreases
Disposable income is equal to
aggregate income minus taxes plus transfer payments
The graph of the aggregate expenditure curve has ________ on the y-axis and ________ on the x-axis
aggregate planned expenditure; real GDP
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
aggregate supply has decreased.
Which of the following events will increase long-run aggregate supply
an advance in technology
An increase in U.S. exports prompted by a rise in foreign incomes represents ________ in the United States
an increase in autonomous expenditure
Which of the following shifts the aggregate demand curve rightward
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
an increase in the price of oil that decreases aggregate supply
The above figure illustrates(LOOKS LIKE K)
an inflationary gap
In the above figure, autonomous expenditure is equal to
$14 trillion
In the above figure, at the price level of 140 and real GDP of
$15 trillion, firms will not be able to sell all their output.
In the figure above, potential GDP equals
$18.0 trillion
In the above figure, the aggregate demand curve is AD2, so the short-run equilibrium level of real GDP is
$18.5 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
$2,400
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
$3 trillion
The figure above illustrates an economy's consumption function. What is autonomous consumption in this economy?
$4 trillion
In the above table, savings are positive when disposable income is greater than
$500
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
$6,500.
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?
-$26
In the above figure, the marginal propensity to save equals
0.10
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
0.15
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?
0.75
In the above figure, the marginal propensity to consume equals
0.90
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 ________
100; $600
In the above figure, the short-run macroeconomic equilibrium is at the price level ________ and the real GDP level _______
110; $18.5 trillion
In the above figure, when the economy is in a long-run equilibrium, the price level will be
120
The value of the multiplier in the economy illustrated in the figure above is
2.0.
Which of the following statements CORRECTLY describes the policy stance of a macroeconomist?
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
AD curve shifts rightward and aggregate demand increases
In the above figure, which movement illustrates the impact of the price level and money wage rate rising at the same rate?
E to G
In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate?
E to I
In the above figure, which part corresponds to a destruction of part of the nation's capital stock?
Figure A
In the above figure, which part corresponds to an increase in the money wage rate?
Figure B
When real GDP exceeds aggregate planned expenditure
GDP will decrease
What could Keynes have meant by his now famous statement, "in the long run we are all dead?"
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.
Monetarist
In the above figure, the shift from point C to point B might be the result of
a decrease in government expenditures
You observe that unplanned inventories are increasing. You predict that there will be
a recession
In the above figure, point A represents
a recessionary gap.
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
at each price level, the aggregate demand curve shifts rightward by an amount equal to 5 times the change in investment.
Business cycle turning points are
brought about by changes in autonomous expenditures that are then subject to the multiplier effect.
The intertemporal substitution effect of a change in the price level results from a
change in the price of current goods relative to future goods
Imports
decrease the size of the multiplier because spending on imports does not increase real GDP in the domestic nation.
An economy currently has an inflationary gap. An increase in the money wage rate will ________ the inflationary gap and ________ the price level.
decrease; increase
If the price level rises, the purchasing power of wealth
decreases
The size of the multiplier
decreases in the long run.
Disposable income ________ when ________
decreases; taxes increase
If the price level increases, the AE curve shifts
downward and there is movement along the AD curve
In the above figure, if aggregate demand does not change, the short-run equilibrium will
eventually adjust to a long-run equilibrium with a lower price level. C
In the above figure, a change in autonomous consumption to $4 trillion with no change to the MPC would cause the consumption function to
exhibit a parallel shift upward.
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.
greater; decrease; increase
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
shift to C and F, respectively.
A Keynesian economist believes that
if the economy was left alone, it would rarely operate at full employment.
In the above figure, the short-run aggregate supply curve is SAS and the aggregate demand curve is AD. An inflationary gap exists
if the long-run aggregate supply curve is LAS1
Which of the following is NOT an autonomous expenditure in the aggregate expenditure model?
imports
Disposable income is
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
increase by $300.
Any expenditure component that depends on the level of real GDP is called
induced expenditure.
The data in the above table indicate that when the price level is 120
inventories rise and the price level falls
The long-run aggregate supply (LAS) curve
is vertical
In the long run, the multiplier
is zero
The multiplier effect exists because a change in autonomous expenditure
leads to changes in income, which generate further spending.
The U.S. exchange rate rises. As a result, there is a
leftward shift of the U.. aggregate demand curve
The slope of the saving function is equal to the
marginal propensity to save.
Because of changes in the ________, the long-run effect of a $10 increase in investment on real GDP equals ________.
money wage rate and price level; zero
The short-run aggregate supply curve shifts leftward when the
money wage rate increases
Aggregate demand increases when
none of the answers provided are correct
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
nothing; that is, in the long run real GDP equals $8,000
In the above figure, the increase in autonomous expenditure moves the economy from point E to
point G.
In the above figure, at the point where AD equals SAS
real GDP exceeds potential GDP
Autonomous expenditure is not influenced by
real GDP.
In the above figure, if the economy is at point a, an increase in ________ will move the economy to_________
real wealth from the fall in the price level; point c
If the aggregate demand curve shifts ________ faster than the long-run aggregate supply curve, then ________ occurs
rightward; inflation
The land of Mordor increases its capital stock. As a result, the long-run aggregate supply curve shifts ________ and so does the ________ curve.
rightward; short-run aggregate supply
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
rises; increases by less than
"Dissaving" occurs whenever
saving is negative
A decrease in autonomous consumption will
shift the aggregate expenditure function downward
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
shift to C and F, respectively.
With an increase in the capital stock, the short-run aggregate supply curve
shifts rightward
In a short-run macroeconomic equilibrium, real GDP exceeds potential GDP. If aggregate demand does not change, then the
short-run aggregate supply curve will shift leftward as the money wage rate rises.
In a short-run macroeconomic equilibrium, potential GDP exceeds real GDP. If aggregate demand does not change, then the
short-run aggregate supply curve will shift rightward as the money wage rate falls.
The data in the above table show that when the price level is 120, if aggregate demand does not change then the
short-run aggregate supply curve will shift rightward.
The larger the multiplier, the ________ the AE curve and the ________ the AD curve from an increase in investment.
steeper; larger the shift in
In the above figure, the curve labeled A shifts rightward if
taxes decrease
In the figure above, if income taxes increase,
the AE curve becomes flatter.
When autonomous expenditure decreases,
the AE curve shifts downward.
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
the AE curve shifts upward to a curve such as AE2.
Moving along which curve does the money wage rate and the price level change in the same proportions?
the LAS curve
In the above figure, the inflationary gap when AD2 is the aggregate demand curve equals
the difference between $18.5 trillion and $18.0 trillion.
A monetarist economist believes that
the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.
The aggregate demand curve illustrates that, as the price level rises
the quantity of real GDP demanded decreases
Other things constant, the economy's aggregate demand curve shows that
the quantity of real GDP demanded decreases when the price level rises
The smaller the slope of the AE curve,
the smaller is the value of the multiplier.
Intertemporal substitution means changes in purchases
through time.
The aggregate demand curve slopes downward because of
wealth and substitution effects.
In the figure above, negative saving occurs
when disposable income is at $10 trillion
After an increase in autonomous spending, in the long run a change in the price level
will reduce the effect of the multiplier
In the above figure, at a disposable income level of $2 trillion, saving equals
zero
