Macro Exam 3 Test File

other things constant, if domestic consumers purchase fewer foreign goods and more domestically produced goods at each level of GDP in the short run:

GDP will rise

one major flaw with Say Law, and a reason why it does not work perfectly in application is that

Say's law ignores savings

in the flow of income and spending, saving and investment are, respectively:

a leakage and an injection

Say's law in classical economies suggest that, over a period of time:

aggregate spending would tend to equal total output and income

in general, economic research suggests that economies tend to

all of the above

which of the following would cause the multiplier for consumer income shocks to increase?

all of the above

refer to the graph above. which of the following factors will shift AS(1) to AS(3)

an increase in input prices

during the spring of 2016, prior to the "Brexit" vote taken in Great Britain, one British Pound cost roughly $1.50 in US dollars, whereas just a few months later the same British Pound cost about $1.20. This means that relative to the British Pound, the US dollar ______ over these months, making it ____ for US businesses to sell their products to households living in Great Britain, but also making it _____ for US consumers to buy goods imported from Great Britain.

appreciated, harder, easier

the long run aggregate supply analysis assumes that:

both input and product prices are variable

without a change in discretionary fiscal policy, if the economy goes into recession, then the:

cyclically- adjusted deficit would stay the same while the actual deficit would increase

given the expected rate of return on all possible investment opportunities in the economy, a _____ in the real interest rate will tend to _______ the level of overall investment

decrease, increase

holding other things constant, a tax cut is associated with which of the following?

expansionary fiscal policy

an economy characterized by high unemployment is likely to be

experiencing a recessionary expenditure gap

the cyclically adjusted deficit as a percentage of GDP is 3 percent in Year 1. This deficit becomes a surplus of 2 percent of GDP in Year 2. It can be concluded from Year 1 to Year 2 that:

fiscal policy turned more contractionary

the investment demand curve will shift to the left as the result of:

general business pessimism about future economic conditions

the immediate-short-run aggregate supply curve is _____, while the short run aggregate supply curve is _____:

horizontal, upward sloping

net exports are negative when:

imports exceed exports

the cyclically-adjusted budget deficit in an economy is zero. if this economy goes into recession, then the actual government budget will be:

in deficit

the american recovery and reinvestment act of 2009 included mostly:

increases in government spending and decreases in taxes

when the economy is at its equilibrium GDP level, all of the following will occur, except:

inventories will be zero

in the great recession of 2007-2009, the aggregate expenditures schedule in the US economy dropped, due in large part to a decline in:

investment expenditures

assume the MPS in an economy went from 0.25 to a new value of 0.15. in this case, the multiplier effect associated with initial changes in consumer spending will

rise to a higher value

if GDP exceeds aggregate expenditures in a private closed economy:

saving will exceed planned investment

if businesses feel more optimistic about the state of the economy, then this change is likely to:

shift the investment demand curve to the right

the short run version of aggregate supply assumes

that product prices are flexible, but that resource prices are fixed

which factor explains the high variability of investment?

the durability of capitol goods

if the cyclically-adjusted budget deficit and the actual budget deficit were the same, we could assume that:

the economy was at full employment

the "rockets and feathers" phenomenon we discussed in class refers to what economic tendency?

the idea that prices in general tend to rise more rapidly than they tend to fall

if aggregate consumption in an economy was always equal to disposable income, then

the income consumption graph would be the same as the 45 degree reference line

an investment demand curve shows the varying amounts of investment that would be undertaken at various levels of:

the real interest rate

if the real interest rate increases

there will be a movement upward along the investment demand curve

which of the following is the best example of an automatic stabilizer for the economy

unemployment benefits paid to laid off workers

the long run aggregate supply curve is:

vertical

the upward slope of the short-run aggregate supply curve is based on the assumption that:

wages and other resource prices do not respond to price level changes

refer to the same above table. the marginal propensity to save is:

.25

refer to the table above. the marginal propensity to consume is

0.75

if the MPS is 0.10, the multiplier will be:

10

in which of the following years did the US Federal Budget experience a surplus?

2001

refer to the same above table. the multiplier associated with this autonomous increase in investment is:

4.0

suppose that an economy produces 2400 units of output, employing 60 units of the input, and the price of the input is $30 per unit. the per unit cost of production is:

$0.75