Econ Final Part IV

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4) If the MPC equals 0.75, then A) consumption expenditure is always more than disposable income. B) for every $100 increase in disposable income, saving increases by $75. C) for every $100 increase in disposable income, saving increases by $25. D) for every $100 increase in consumption expenditure, disposable income increases by $75.

C

4) If the money prices of resources changes A) the LAS curve shifts. B) the macroeconomic equilibrium is unaffected. C) the SAS curve shifts. D) the AD curve shifts.

C

41) An economy is at full employment. Which of the following events can create a recessionary gap? A) a decrease in money wages B) an increase in foreign income C) an increase in taxes D) a decrease in the quantity of capital

C

10) An aggregate supply curve depicts the relationship between A) the price level and the aggregate quantity supplied. B) the price level and nominal GDP. C) the price level and the aggregate quantity demanded. D) household expenditures and household income.

A

12) We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run A) real GDP equals potential GDP. B) the price level is constant but in the short run it fluctuates. C) technology is fixed but it is not in the short run. D) the aggregate supply curve is horizontal while in the short run it is upward sloping.

A

13) Between 2013 and 2014 the government estimates that disposable income in the United States decreased. Consequently, as a result of this change, consumption expenditure A) decreased. B) remained constant. C) increased. D) More information is needed about how taxes changed between 2013 and 2014.

A

21) When aggregate planned expenditure is less than real GDP, unplanned A) investment occurs. B) exports are made. C) government expenditures are made. D) consumption expenditure occurs.

A

25) The U.S. monetary policy implemented in 2008 was an attempt to A) decrease interest rates in order to stimulate business investment and consumption expenditure, thereby increasing AD. B) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure and thereby increasing AD. C) decrease the exchange rate in order to boost net exports, thereby increasing AD. D) decrease interest rates in order to stimulate business investment and consumption expenditure, thereby increasing SAS.

A

32) Which of the following can be said about economic growth? I. Economic growth is the result of increases in long-run aggregate supply. II. Economic growth is the result of increases in aggregate demand. A) I only B) II only C) I and II D) neither I or II

A

39) Suppose the economy was initially in a long-run equilibrium. Then the world economy expands so that foreign incomes rise. U.S. aggregate demand ________ and eventually the money wage rate ________. A) increases; rises B) decreases; rises C) increases; falls D) decreases; falls

A

45) In the short-run macroeconomic equilibrium A) real GDP and the price level are determined by short-run aggregate supply and aggregate demand. B) the price level is fixed and short-run aggregate supply determines real GDP. C) real GDP is always less than potential GDP. D) real GDP equals potential GDP and aggregate demand determines the price level.

A

5) As disposable income increases, there is a ________ the saving function. A) movement along B) rightward shift of C) change in the slope of D) leftward shift of the

A

7) Moving along the short-run aggregate supply curve, ________. A) the money wage rate, the prices of other resources, and potential GDP remain constant B) real GDP equals nominal GDP C) real GDP equals potential GDP D) the real wage rate is constant

A

8) An increase in disposable income shifts A) neither the consumption function or the savings function because it leads to a movement along both the consumption and savings function. B) the consumption function upward and leads to a movement along the savings function. C) both the consumption and savings functions downward. D) both the consumption and savings functions upward.

A

10) Dissaving A) is equal to consumption expenditure when disposable income is greater than zero. B) occurs when consumption is greater than disposable income. C) is equal to the amount of saving when consumption is less than disposable income. D) is equal to taxation when disposable income is zero.

B

13) Suppose the price level, the money wage, and the price of all other resources rise by 10 percent. This set of changes leads to A) a leftward shift of the LAS curve. B) an upward movement along the LAS curve. C) an upward movement along the SAS curve. D) a downward movement along the LAS curve

B

14) When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment. A) greater than; less than B) less than; greater than C) greater than; greater than D) less than; less than

B

18) Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of A) an increase in income. B) an increase in the price level. C) a decrease in income. D) a decrease in the price level.

B

7) A movement along the consumption function to higher levels of consumption expenditure arises because A) the level of disposable income decreases. B) the level of disposable income increases. C) the level of desired saving rises. D) household wealth rises.

B

3) With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that A) consumption spending is more than $8 trillion because taxes have been paid. B) consumption spending is $8 trillion when disposable income is $8 trillion. C) consumption spending is less than $8 trillion because taxes must be paid. D) autonomous consumption spending is $8 trillion.

B

35) Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________. A) falls; rises; falls B) falls; falls; falls C) rises; falls; rises D) rises; rises; rises

B

37) Inflation occurs over time as a result of A) long-run aggregate supply increasing faster than aggregate demand. B) aggregate demand increasing faster than long-run aggregate supply. C) long-run aggregate supply increasing faster than short-run aggregate supply. D) decreases in aggregate demand

B

40) The government increases taxes. As a result, in the short run, real GDP ________ and the price level ________. A) increases; rises B) decreases; falls C) decreases; rises D) increases; falls

B

46) Which school of thought believes that real GDP always equals potential GDP? A) only Keynesian B) only classical C) Monetarist D) both Keynesian and classical

B

48) In 2009, just after taking office, President Obama approved an $800 billion stimulus package of tax cuts and increased government spending to combat the recession brought on by the financial crisis of 2007. Which group of economists most approved of President Obama's actions? A) monetarists B) Keynesian economists C) free market economists D) classical economists

B

49) Which school of thought believes that recessions are the result of inappropriate monetary policy? A) only Keynesian B) Monetarist C) only classical D) both Keynesian and classical

B

16) Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures A) are less than real GDP, and real GDP will increase. B) exceed real GDP, and real GDP will increase. C) are less than real GDP, and real GDP will decrease. D) are equal to real GDP, and there will be no change in real GDP

C

17) If planned expenditures equal $16 trillion when real GDP is $16.5 trillion, then A) inventories will decrease by $0.5 trillion. B) there will be excess demand for most goods. C) actual investment will exceed planned investment. D) the economy must have a trade surplus to sell the excess goods and services.

C

17) Which of the following increases aggregate demand and shifts the AD curve rightward? A) an increase in the exchange rate that makes imports less expensive B) a fall in the price level C) an increase in the quantity of money and a resulting fall in the interest rate D) predictions of a recession that lead to expectations of lower future income

C

2) There is a movement along the consumption function if there is ________. A) an increase in autonomous consumption B) an increase in the expected future income C) an increase in disposable income D) a decrease in the real interest rate

C

20) If aggregate planned expenditure is less than real GDP then A) firms increase their planned expenditure until aggregate planned expenditure increases to equal real GDP. B) firms' inventories will decrease and real GDP will decrease as production falls. C) firms' inventories will increase and real GDP will decrease as production falls. D) consumers increase their planned expenditure until aggregate planned expenditure increases to equal real GDP.

C

22) Which of the following increases aggregate demand? A) a rise in the interest rate B) a decrease in government expenditure C) a decrease in taxes D) a decrease in foreign income

C

23) If you have $1,000 in wealth and the price level increases by 20 percent, then A) the $1,000 dollars will buy 20 percent more goods and services. B) you will be able to buy fewer goods, but the real value of those goods will increase. C) the $1,000 will buy fewer goods and services. D) the real value of the $1,000 increases.

C

24) Expenditure that does NOT depend on real GDP is called A) induced expenditure. B) equilibrium expenditure. C) autonomous expenditure. D) spurious expenditure.

C

24) Which of the following shifts the aggregate demand curve rightward? A) an increase in the exchange rate B) an increase in imports C) an increase in government expenditure D) an increase in tax rates

C

26) Which of the following shifts the aggregate demand curve rightward? A) an increase in the tax rate B) an increase in the exchange rate C) an increase in the quantity of money D) a decrease in the price level

C

6) The marginal propensity to consume measures A) how much consumption expenditure occurs at the equilibrium level of income. B) what percentage of disposable income goes to saving. C) the fraction of a change in disposable income that is spent on consumption expenditure. D) how much of a given level of disposable income is consumed.

C

9) An aggregate supply curve depicts the relationship between A) household expenditures and household income. B) the price level and the quantity of nominal GDP supplied. C) the price level and the quantity of real GDP supplied. D) the money wage rate and the quantity of real GDP supplied

C

9) The Keynesian model of aggregate expenditure describes the economy in A) only a strong expansion. B) both the short run and the long run. C) the short run. D) the long run.

C

1) The marginal propensity to consume is A) the percentage or fraction of income that is consumed. B) the percentage change in disposable income. C) the slope of the savings function. D) never greater than 1.

D

1) Which of the following statements regarding aggregate supply are CORRECT? A) Moving along the short-run aggregate supply curve, both the price level and the money wage rate change by the same percentage. B) Moving along the long-run aggregate supply curve, the money wage rate changes but the price level is constant. C) Moving along the short-run aggregate supply curve, the money wage rate changes but the price level is constant. D) Moving along the long-run aggregate supply curve, both the price level and the money wage rate change by the same percentage.

D

11) A fall in the money wage rate shifts A) the LAS curve rightward but leaves the SAS curve unchanged. B) both the SAS and LAS curves rightward. C) both the SAS and LAS curves leftward. D) the SAS curve rightward but leaves the LAS curve unchanged.

D

12) The MPS equals the ratio of A) saving to consumption expenditure. B) the change in saving to the change in consumption expenditure. C) saving to real GDP. D) None of the above answers is correct.

D

14) The short-run aggregate supply curve is upward sloping because A) most business firms operate with long-term contracts for output but not labor. B) lower taxes motivate people to work more. C) a lower price level creates a wealth effect. D) money wage rates do not immediately change when the price level changes.

D

15) A change in ________ results in a movement along the short-run aggregate supply curve but does not shift the short-run aggregate supply curve. A) the money wage rate B) the quantity of capital C) technology D) the price level

D

15) At equilibrium expenditure, unplanned changes in inventory A) must be positive. B) must be negative. C) might be either positive or negative. D) must be zero.

D

20) The U.S. fiscal policy implemented in 2008 was an attempt to A) decrease the exchange rate in order to boost net exports, and thereby increasing AD. B) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing SAS. C) decrease interest rates in order to stimulate business investment and consumption expenditure, and thereby increasing AD. D) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing AD.

D

21) A decrease in government expenditure on goods and services A) increases aggregate demand. B) increases the aggregate quantity demanded. C) decreases the aggregate quantity demanded. D) decreases aggregate demand.

D

3) When the quantity of capital increases, then the A) SAS curve shifts rightward and the LAS curve shifts leftward. B) SAS curve shifts rightward and the LAS curve does not shift. C) LAS curve shifts rightward and the SAS curve does not shift. D) SAS curve shifts rightward and the LAS curve shifts rightward.

D

30) The aggregate demand curve shows that, if other factors are held constant, a A) lower price level results in a higher interest rate. B) higher price level results in a lower interest rate. C) higher price level results in an increase in the quantity of real GDP demanded. D) higher price level results in a decrease in the quantity of real GDP demanded.

D

43) By using only the aggregate demand curve, we can determine A) only the quantity of real GDP. B) both the price level and quantity of real GDP. C) only the price level. D) neither the price level nor the quantity of real GDP.

D

47) ________ economists believe that the economy is self-regulating and will be at full employment as long as monetary policy is not erratic. A) All B) Classical C) Keynesian D) Monetarist

D

50) Which of the following statements CORRECTLY describes the policy stance of a macroeconomist? A) A Keynesian believes that if taxes are always kept low and the quantity of money is kept on a steady growth path, no policy actions will be needed to maintain full employment. B) A new classical macroeconomist believes that fiscal and monetary policy are required to maintain full employment. C) A monetarist believes that the quantity of money should be constantly changed in order to offset changes in aggregate demand. D) A classical macroeconomist believes that maintaining consistently low taxes will allow the economy to expand at an appropriate and rapid pace.

D

6) Which of the following statements is TRUE? A) The long-run aggregate demand curve is upward sloping. B) The long-run aggregate supply curve is upward sloping. C) The short-run aggregate supply curve is vertical. D) The long-run aggregate supply curve is vertical.

D


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