Unit 3 Part 2 AP Macro Multiple Choice and True/ False Questions

If there was a change in investment spending of $10 and the marginal propensity to save was 0.25, then real GDP would increase by a)$10 b) $20 c) $25 d) $40

d) $40

If the prices of imported resources increase, then this event would most likely a) decrease aggregate supply b) increase aggregate supply c) increase aggregate demand d) decrease aggregate demand

a) decrease aggregate supply

If the value of the marginal propensity to consume is 0.6 and real GDP falls by $25 this was caused by a decrease in initial spending of a) increase by $75 b) decrease by $75 c) increase $25 d) decrease $25

a) increase by $75

when the price level rises, a) the demand from money and interests rates rises b) opening that is sensitive to interest rate changes increases c) holders of financial assets with fixed money values increase their spending d) holders of financial assets with dices money values have more purchasing power

a) the demand from money and interests rates rises

which would increases investment demand? a) an increase in business taxes b) an increase in planned inventories c) a decrease in the rate of technological changes d) an increase in the cost of aquatint capital goods

b) an increase in planned inventories

if congress passed much stricter laws to control the air pollution from businesses, this action would tend to a) increase per-unit production costs and shift the aggregate supply curve to the right b) increase permit production costs and shift the aggregate demand curve to the left c) increase per unit proaction costs and shift the aggregate demand curve to the left d) decrease per unit production costs and shift the aggregate supple curve to the left

b) increase permit production costs and shift the aggregate demand curve to the left

Which relationship is an inverse one? a)consumption and disposable income b) investment spending and the rate of interest c)saving and disposable income d)investment spending and gdp

b) investment spending and the rate of interest

the short run aggregate supply curve assumes that a) nominal wages respond to changes in the price level b) nominal wages do not respond to changes in the price level c) the economy is operating at full employment output c) the economy is operating at less than full employment output

b) nominal wages do not respond to changes in the price level

the aggregate supply curve is the relationship between the a) price level and the real domestic output purchased b) price level and the real domestic output produced c) price level that producers are willing to accept and the price level d) real domestic output purchased and the real domestic output produced

b) price level and the real domestic output produced

the aggregate demand curve is the relationship between the a)price level and what producers will supply b) price level and the real domestic output purchased c) price level and the real domestic output produced d)real domestic output purchased and the real domestic output produced

b) price level and the real domestic output purchased

If in an economy a $150 billion increase in investment spending creates $150 billion of new income in the first round of the multiplier process and $105 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively, a) 5.00 and 0.8 b) 4 and 0.75 c) 3.33 and 0.7 d) 2.5 and 0.4

c) 3.33 and 0.7

the aggregate demand curve will be increased by a) decrease in the price level b)an increase in the price level c) a depreciation in the value of the us dollar d) an increase in the excess

c) a depreciation in the value of the us dollar

an increase in business taxes will tend to a) decrease aggregate demand but not change aggregate supply b ) decrease aggregate supply but not change aggregate demand c) decrease aggregate demand and decrease aggregate supply d) decrease aggregate supply and increase aggregate supply

c) decrease aggregate demand and decrease aggregate supply

higher real interest rates likely to a)increase consumption and saving b)decrease consumption and savings c) decrease consumption and increase saving d) increase consumption and decrease saving

c) decrease consumption and increase saving

in the aggregate demand-aggregate supply model an increase in the price level will a) increase the real value of wealth b) increase the strength of the multiplier c) decrease the strength of the multiplier d) have no effect on the strength of multiplier c) decrease the strength of the multiplier

c) decrease the strength of the multiplier

which best explains the variability of investment? a) the predictable useful life of capital goods b) constancy or regularities in business innovations c) instabilities in the level of profits d) business pessimism about this future

c) instabilities in the level of profits

in the long run the aggregate supply curve is a) upscoping b) downsloping c) vertical d) horizontal

c) vertical

If at a particular price level, real domestic output from producers is greater than real domestic output desired by purchasers, there will be a: a) surplus and the price level will rise b) surplus and the price level will fall c)shortage and the petite level will rise d) shortage and the price level will fall

c)shortage and the petite level will rise

A sharp decline in the real value of stock prices, which is independent of a change in the price level would best be an example of a) the interest rate effect b)the foreign purchases effect c) a change in household borrowing d) a change in real value of consumer wealth

d) a change in real value of consumer wealth

one explanation for the downward slope of the aggregate demand curve is that a change in the price level results in a) a multiplier effect b) an income effect c) a substitution effect d) a foreign purchases effect

d) a foreign purchases effect

an increase in aggregate demand will increase a) the price level and have no effect on real domestic output b) the real domestic and have no effect on the price level c) the price leave decrease the real domestic output d) both real output and the price level

d) both real output and the price level

A decrease in investment demand would be a consequence of a decline in a) the rate of interests b) the level of wages paid c) business taxes d) expected future sales

d) expected future sales

True or False: A change in aggregate demand is caused by a change in the prove level, other things equal

false

True or False: A large decline in household borrowing will increase consumption spending and aggregate demand

false

True or False: The real balances effect is one the determinants of aggregate demand

false

true or False: an increase in aggregate demand is associated with cost push inflation

false

true or False: appreciation of the dollar relative to foreign currencies will tend to increase net exports and aggregate demand

false

true or False: fear of price wars tends to make the price level more flexible rather than less flexible

false

true or False: When the determinants of short-run aggregate supply change, they alter the per-unit production cost at each price level and thereby aggregate supply.

true

true or False: a decrease in aggregate supply decreases the equilibrium real domestic output and increases the price level resulting in cost push inflation

true

true or False: an increase in aggregate demand will increase both the price level and the real domestic output

true

true or False: an increase in aggregate supply driven by productivity increases can offset the inflationary pressures from an increase in aggregate demand

true

true or False: at the equilibrium price level, the real domestic output purchased is equal to the real domestic output produced

true

true or False: per-unit production costs is determined by diving total input costs by units of output

true

true or False: productivity is a measure of real output per unit of input

true

true or False: the aggregate supply curve is vertical in the long run at the full employment level of output

true

true or False: the greater the increase in the price level that results form an increase in aggregate demand the greater will be the increase in the equilibrium real gdp

true

true or False: the immediate short run aggregate supply curve is horizontal and the short run aggregate supply curve is unsloping

true

true or False: a significant decrease in aggregate demand can result in recession and cyclical unemployment

true