Macroeconomics Chapter 12
The multiplier effect indicates that: a. a decline in the interest rate will cause a proportionately larger increase in investment. b. a change in spending will change aggregate income by a larger amount. c. a change in spending will increase aggregate income by the same amount. d. an increase in total income will generate a larger change in aggregate expenditures.
b
The aggregate demand curve is: a. vertical under conditions of full employment. b. horizontal when there is considerable unemployment in the economy. c. downsloping because of the interest-rate, real-balances, and foreign purchases effects. d. downsloping because production costs decrease as real output rises.
c
The multiplier can be calculated as: a. 1/(MPS + MPC). b. MPC/MPS. c. 1/(1 - MPC). d. 1 - MPC = MPS.
c
Graphically, demand-pull inflation is shown as a: a. rightward shift of the AD curve along an upsloping AS curve. b. leftward shift of the AS curve along a downsloping AD curve. c. leftward shift of the AS curve along an upsloping AD curve. d. rightward shift of the AD curve along a downsloping AS curve.
a
If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift: a. leftward by $40 billion at each price level. b. rightward by $20 billion at each price level. c. rightward by $40 billion at each price level. d. leftward by $20 billion at each price level.
a
Which of the following would most likely shift the aggregate demand curve to the right? a. An increase in stock prices that increases consumer wealth. b. Increased fear that a recession will cause workers to lose their jobs. c. An increase in personal income tax rates. d. A reduction in household borrowing because of tighter lending practices.
a
In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to: a. affect neither aggregate supply nor aggregate demand. b. increase aggregate demand. c. reduce aggregate demand. d. reduce aggregate supply.
b
In the diagram, a shift from AS1 to AS3 might be caused by a(n): a. increase in productivity. b. increase in the prices of imported resources. c. decrease in the prices of domestic resources. d. decrease in business taxes.
b
The determinants of aggregate demand: a. explain why the aggregate demand curve is downsloping. b. explain shifts in the aggregate demand curve. c. demonstrate why real output and the price level are inversely related. d. include input prices and resource productivity.
b
The equilibrium price level and level of real output occur where: a. real output is at its highest possible level. b. exports equal imports. c. the price level is at its lowest level. d. the aggregate demand and supply curves intersect.
d
Other things equal, a decrease in the real interest rate will: a. expand investment and shift the AD curve to the left. b. expand investment and shift the AD curve to the right. c. reduce investment and shift the AD curve to the left. d. reduce investment and shift the AD curve to the right.
b
If the MPC is .6, the multiplier will be: a. 4.0. b. 6.0. c. 2.5. d. 1.67.
c
