Parent Functions, Algebra

Based on the data in the table, the money supply measured by M2 is

$1,725 billion.

If the marginal propensity to consume is equal to 0.75, a $70 billion increase in government spending could cause a maximum increase in output of

$280 billion

Based on the data in the table, the money supply measured by M1 is

$450 billion.

Which of the following will result in the greatest increase in aggregate demand?

A $100 increase in government expenditures, coupled with a $100 decrease in taxes.

A negative aggregate supply shock will result in which of the following in the short run? 1/1

An increase in both the price level and the unemployment rate.

A decrease in the prices of inputs will cause which of the following to occur in the short run?

An increase in the short-run aggregate supply and a decrease in the price level.

According to the graph, which of the following is true about the long-run equilibrium of the economy depicted?

As wages increase, the short-run aggregate supply curve will shift to the left to restore long-run equilibrium.

In the graph of the short-run aggregate supply (SRAS) and the long-run aggregate supply (LRAS) curves below, which of the following is true?

At point X, the economy is experiencing a recessionary gap.

Which of the following constitutes the largest component of the United States money supply (M1) today? 0/1

Checkable deposits (demand deposits)

Which of the following is considered the most liquid asset?

Currency

Assume that the marginal propensity to consume is 0.90. As a result of an increase in the tax rates, the government collects an additional $20 million. What will be the impact on gross domestic product (GDP) ?

GDP will decrease by a maximum of $180 million.

Suppose that the economy is in the midst of a recession and government policy makers want to increase aggregate demand by $600 billion. If the economy's marginal propensity to consume is 0.75, the government should do which of the following?

Increase spending by $150 billion.

Which of the following is true of the opportunity cost of holding cash?

It increases as the interest rate rises.

Fred Jones withdraws $1,000 in cash from his savings account. What immediate effect does this transaction have on the monetary aggregate measures of M1 and M2 ? 0/1

M1 Increases, M2 No Change

How does the automatic adjustment mechanism move the economy to potential real gross domestic product (GDP) in the long run when current real GDP is above potential GDP?

Nominal wages rise, shifting the short-run aggregate supply curve to the left.

Which of the following measures the opportunity cost of holding currency?

The forgone interest on alternative assets

If the marginal propensity to consume is equal to 0.8, which of the following will necessarily be true?

The spending multiplier will be equal to 5.

Aggregate demand may be measured by adding

consumption, investment, government spending, and net exports

All of the following are components of the money supply in the United States EXCEPT

gold bullion

Which of the following answer choices constitute fiscal policy?

government expenditures, government transfers, and taxation

In the narrowest definition of money, M1, savings accounts are excluded because they are

not a medium of exchange

Pat deposits a portion of her wages into a personal savings account every week. The saved money can be considered to be primarily a

store of value

The real value of the United States dollar is determined by

the goods and services it will buy

A rightward shift in the short-run aggregate supply curve will occur when

the stock of physical capital increases