Unit 4 All Quiz Income & Expenditure / Aggregate Demand / Aggregate Supply / AD & AS

If the marginal propensity to consume is 0.9, then the marginal propensity to save must be:

0.1

The multiplier applies to:

investment, net exports, and government spending

A decline in investment will shift the AD curve to the:

left by a multiple of the change in investment.

If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve will shift:

leftward by $40 billion at each price level.

Graphically, cost-push inflation is shown as a:

leftward shift of AS curve

The most important determinant of consumption and saving is the:

level of income

The wealth effect suggests that a:

lower price level will increase the real value of many financial assets and therefore cause an increase in spending

A rightward shift in the aggregate supply curve is best explained by an increase in:

productivity

An increase in input productivity will:

reduce the equilibrium level, assuming downward flexible prices.

Which would most likely increase aggregate supply?

an increase in productivity

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift:

rightward by $50 billion at each price level.

If the MPC is 0.6, the multiplier will be:

2.5

If disposable income increases form $912 to $927 billion and MPC = 0.6, then consumption will increase by:

9

Which of the following is a true statement?

A decline in aggregate demand will primarily affect real output and employment if prices are inflexible downward.

Which combination factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates

If the dollar appreciates relative to foreign currencies, then:

Foreign buyers will find U.S. goods becoming more expensive

The value of the multiplier is likely to fall if there is a fall in:

The marginal propensity to consume.

When the general price level in our economy increases, the following effects occur except:

The purchasing power of people's saving will increase

The long-run aggregate supply curve is:

Vertical

Other things equal, a decrease in the real interest rate will:

expand investment and shift the AD curve to the right.

The multiplier is useful in determining the:

change in GDP resulting from a change in spending

The multiplier effect relates:

changes in spending to changes in real GDP

Other things equal, appreciation of the dollar:

decreases aggregate demand in the United States and may increase aggregate supply by reducing the prices of imported resources.

The economy's long-run AS curve assumes that wages and other resource prices:

eventually rise and fall to match upward or downward changes in the price level.

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will:

increase U.S. exports and decrease U.S. imports

Other thins equal, a reduction in personal and business taxes can be expected to:

increase both aggregate demand and aggregate supply

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will:

increase by $10 billion.

The short-run aggregate supply curve represents circumstances where:

input prices are fixed, but output prices are flexible.

Other things equal, an improvement in productivity will:

shift the aggregate supply curve to the right.

If Trent's MPC is 0.80, this means that he will:

spend eight-tenths of any increase in his disposable income.

Suppose that nominal wages fall and productively rises in a particular economy. Other things equal, the aggregate:

supply curve will shift rightward.

The equilibrium price level and level of real output occur where:

the aggregate demand and supply curves intersect.

The most important determinant of consumer spending is:

the level of income

Answer the question on the basis of the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. Refer to the above data. The MPC is:

0.90

If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes:

The foreign purchases effect.

Which of the following would be one of the factors that shift the aggregate demand curve? A change in:

Profit expectations on investment projects

Which of the following is incorrect?

When the price level increases, wealth increase, businesses and households find themselves wealthier and therefore increase their spending.

The determinants of aggregate demand:

explain shifts in the aggregate demand curve.