Econ 2201 Quiz 6

If the MPC = 0.65, then the government purchases multiplier is about

2.86

During recessions

All of the above are correct

suppose the stock market crashes, then

aggregate demand decreases, which the Fed could offset by purchasing bonds.

of the following statements, which accurately explains the crowding-out effect?

an increase in government expenditures increase the interest rate and so reduces investment spending

of the following choices, which shifts both the long-run and short-run aggregate supply curves right?

an increase in the capital stock

which type of spending falls during recessions?

consumption and investment

If the price level rises, the real value of a dollar

falls, so people will want to buy less. This response helps explain the slope of the aggregate demand curve.

The position of the long-run aggregate supply curve

is determined by resource usage and technology

based upon the classical model, an increase in the money supply causes

prices to rise in the long run

the aggregate-demand curve illustrates the

quantity of domestic produced goods and services that households, firms, the government, and customers abroad want to buy at each price level

the classical dichotomy calls attention to the disconnection of

real and nominal variables

Tax cuts shift aggregate demand

right as do increases in government spending

Stagflation occurs when prices

rise and unemployment rises

to a great degree, most economists utilize the demand and aggregate supply model to analyze

short-run fluctuations in the economy

the aggregate-demand curve

shows an inverse relation between the price level and the quantity of all goods and services demanded

Critics of stabilization policy argue that

the lag problem ends up being a cause of economic fluctuations.

Fiscal policy is determined by

the president and congress and involves changing government spending and taxation

which of the following is correct when analyzing the graph for aggregate demand and aggregate supply?

the variable on the vertical axis is nominal, the variable horizontal axis is real

From the following statements, which is true concerning recessions?

they tend to be associated with rising unemployment rates

An example of an automatic stabilizer is

unemployment benefits