Macroeconomics unit 4

Which combination of factors would most likely increase aggregate demand?

An increase in consumer wealth and a decrease in interest rates

Which would most likely increase aggregate supply?

An increase in productivity

A decrease in government spending will cause a(n):

Decrease in aggregate demand

An increase in expected future income will:

Increase aggregate demand

The aggregate demand curve shows the:

Inverse relationship between the price level and real GDP purchased

The aggregate demand curve is the relationship between the total demand for output and the:

Price level

An aggregate supply curve represents the relationship between the:

Price level and the production of real domestic output

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

Profit expectations on investment projects

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

The marginal propensity to consume

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

The multiplier effect indicates that:

a change in spending will change aggregate income by a larger amount.

Which one of the following will cause a movement down along an economy's consumption schedule?

a decrease in disposable income

In which of the following sets of circumstances can we confidently expect inflation?

aggregate supply decreases and aggregate demand increases

The multiplier effect means that:

an increase in investment can cause GDP to change by a larger amount

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

an increase in the price of imported resources

The immediate-short-run aggregate supply curve represents circumstances where:

both input and output prices are fixed

The multiplier is useful in determining the:

change in GDP resulting from a change in spending

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 aggregate demand curve is:

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

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

expand investment and shift the AD curve to the right.

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.

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

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

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

increase both aggregate demand and aggregate supply.

Given a fixed upsloping AS curve, a rightward shift of the AD curve will:

increase both the price level and real output.

Refer to the above graph, which shows an aggregate demand curve. If the price level decreases from 200 to 100, the real output demanded will:

increase by $200 billion

In the above diagram, a shift from AS1 leftward to AS3 might be caused by a(n):

increase in the prices of imported resources.

A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will:

increase the price level by more than real output

The multiplier applies to:

investment, net exports, and government spending.

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift

leftward by $40 billion at each price level.

The aggregate supply curve (short-run) is upsloping because:

per-unit production costs rise as the economy moves toward and beyond its full-employment real output.

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 price level, assuming downward flexible prices.

If investment increases by $10 billion and the economy's MPC is .8, the aggregate demand curve will shift:

rightward by $50 billion at each price level

The aggregate demand curve:

shows the amount of real output that will be purchased at each possible price level.

The greater is the marginal propensity to consume, the:

smaller is the marginal propensity to save

Suppose that nominal wages fall and productivity 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.

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.

The most important determinant of consumer spending is:

the level of income.

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

.1

Answer the question on the basis of the following data for a hypothetical economy. Disposable Income Saving $0 -$10 50 0 100 10 150 20 200 30 Refer to the above data. The marginal propensity to consume is:

.80

Disposable Income Consumption $200 $205 225 225 250 245 275 265 300 285 Refer to the above data. The marginal propensity to consume is:

.80

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

9

Refer to the above graph. Which of the following factors will shift AS1 rightward to AS2?

A reduction in business taxes