Final econ 202

In the above table, C is consumption expenditure, I is investment, G is government expenditure, and X - M is net exports. All entries are in dollars. The equilibrium level of real GDP is A)$2,400. B)$2,300. C)$2,200. D)$2,500.

A)$2,400.

Based upon the above table, the MPS is equal to A)0.25. B)1. C)0.75. D)Cannot be determined from the information given.

A)0.25.

Which of the following statements is FALSE?A)An increase in disposable income leads to a decrease in aggregate demand. B)Taxes and transfer payments affect aggregate demand by changing disposable income. C)Government expenditure affects aggregate demand directly because government expenditure is a component of aggregate demand. D)Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and government expenditures.

A)An increase in disposable income leads to a decrease in aggregate demand.

In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate? A)E to F B)E to G C)E to K D)E to I

A)E to F

In the above figure, which movement illustrates the impact of a falling price level and a constant money wage rate? A)E to H B)E to J C)E to F D)E to I

A)E to H

Which of the following events will increase long-run aggregate supply? A)an advance in technology B)a decrease in expected profit C)an increase in the interest rate D)an increase in resource prices

A)an advance in technology

According to the intertemporal substitution effect, a fall in the price level will A)cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases. B)increase the real value of wealth, which raises the interest rate so that the quantity of real GDP demanded decreases. C)decrease the real value of wealth, which increases the quantity of real GDP demanded. D)increase net exports, which causes the quantity of real GDP demanded to increase.

A)cause the interest rate to fall so that investment increases and the quantity of real GDP demanded increases.

The AD curve slopes A)downward due to the wealth and substitution effects. B)upward due to the price and substitution effects. C)downward due to the wealth and price effects. D)upward due to the wealth and substitution effects.

A)downward due to the wealth and substitution effects.

The Federal Reserve lowers interest rates. As a result, in the short run, real GDP ________ and theprice level ________. A)increases; rises B)increases; falls C)decreases; rises D)decreases; falls

A)increases; rises

The part of aggregate planned expenditure that does not vary with real GDP A)is autonomous expenditure .B)equals equilibrium expenditure. C)is induced expenditure. D)equals zero.

A)is autonomous expenditure

In the above figure, the economy is at point A(110,18.0). Then the price level falls to 90 while the money wage rate does not change. Firms will be willing to supply output equal to A)less than $18.0 trillion. B)$18.0 trillion. C)more than $18.0 trillion. D)Without more information, it is impossible to determine which of the above answers iscorrect.

A)less than $18.0 trillion.

The multiplier effect A)magnifies small changes in spending into larger changes in real GDP. B)generates instability in autonomous expenditure. C)promotes stability of the general price level. D)increases the MPC.

A)magnifies small changes in spending into larger changes in real GDP.

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises, A)people substitute toward more imported goods and services. B)firms produce more goods and services. C)peoples' wealth increases. D)firms produce fewer goods and services.

A)people substitute toward more imported goods and services.

The short-run aggregate supply curve is upward sloping because in the short run the A)price level changes but the money wage rate does not. B)neither the money wage rate nor the price level can change. C)both the money wage rate and the price level change. D)money wage rate changes but the price level does not.

A)price level changes but the money wage rate does not.

In the long run A)real GDP is equal to potential GDP. B)the aggregate supply curve is upward sloping. C)aggregate supply depends on the price level. D)All of the above answers are correct.

A)real GDP is equal to potential GDP.

The long-run aggregate supply curve illustrates the A)relationship between the price level and real GDP when the economy is at full employment. B)amount of products producers offer at various prices when money wages and other resource prices are fixed. C)relationship between the price level and real GDP when the economy is at zero unemployment. D)surpluses, shortages and equilibrium level of GDP.

A)relationship between the price level and real GDP when the economy is at full employment.

The long-run aggregate supply curve is the relationship between the quantity of real GDPsupplied and ________ when ________.2)A)the price level; real GDP equals potential GDP B)real GDP demanded; the price level does not change C)the price level; real GDP equals nominal GDP D)real GDP demanded; the wage rate is constant

A.)the price level; real GDP equals potential GDP

If consumption expenditures for a household increase from $1,000 to $1,800 when disposable income rises from $1,000 to $2,000, the marginal propensity to consume is A)80. B)0.8. C)1.25. D)0.2.

B)0.8.

In the above figure, the short-run macroeconomic equilibrium is at the price level ________ and the real GDP level ________. A)120; $18 trillion B)110; $18.5 trillion C)110; $18 trillion D)100; $18 trillion

B)110; $18.5 trillion

f there are no taxes or imports and MPC= 0.5, the multiplier equals A)5.0. B)2.0. C)0.5. D)6.0.

B)2.0.

In the macroeconomic short run A)the unemployment rate is zero. B)actual real GDP may be less than or more than potential GDP. C)actual real GDP always equals potential GDP. D)by definition, the economy is always moving away from full employment.

B)actual real GDP may be less than or more than potential GDP.

Which of the following does NOT shift the aggregate demand curve? A)an increase in people's expected future incomes B)an increase in the price level C)an increase in current foreign income D)a decrease in the quantity of money

B)an increase in the price level

If real GDP is $19 trillion and planned aggregate expenditure is $19.5 trillion, inventories will be A)below their target and real GDP will decrease. B)below their target and real GDP will increase. C)above their target and real GDP will decrease. D)above their target and real GDP will increase.

B)below their target and real GDP will increase.

The positive slope of the consumption function indicates that A)the amount of household wealth is subject to change. B)consumers increase their total consumption expenditure when disposable income increases. C)consumers spend less out of each extra dollar of income. D)when prices fall consumers spend more.

B)consumers increase their total consumption expenditure when disposable income increases.

Consumers divide disposable income into A)saving and taxes. B)consumption and saving. C)consumption, saving, and taxes. D)consumption and taxes.

B)consumption and saving.

Suppose that the slope of the AE curve is 0.75. Then a $100 decrease in autonomous spending means equilibrium expenditure will A)increase by $400. B)decrease by $400. C)increase by $750. D)decrease by $750.

B)decrease by $400.

If aggregate demand grows only slightly faster than potential GDP, then the economy will A)experience recession. B)experience economic growth with low inflation. C)be at a business-cycle peak. D)experience economic growth with high inflation.

B)experience economic growth with low inflation.

Disposable income is A)income plus transfer payments minus consumption expenditure. B)income minus taxes plus transfer payments. C)income minus saving. D)total income divided by the price level.

B)income minus taxes plus transfer payments.

A recessionary gap means that the level of real GDP at the short-run macroeconomic equilibrium A)equals full-employment GDP. B)is less than full-employment GDP. C)is more than full-employment GDP. D)may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

B)is less than full-employment GDP.

In the above figure, point d represents the point where planned expenditures are ________ real GDP. A)greater than B)less than C)equal to D)There is not enough information to answer the question.

B)less than

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

B)occurs when consumption is greater than disposable income.

The U.S. aggregate demand curve shifts leftward if A)there is a tax cut. B)the Federal Reserve increases the interest rate. C)the exchange rate falls. D)the economic conditions in Europe improve so that European incomes increase.

B)the Federal Reserve increases the interest rate.

The long-run aggregate supply curve is ________ because along it, as prices rise, the money wage rate ________. A)vertical; falls B)vertical; rises C)upward sloping; stays constant D)upward sloping; falls

B)vertical; rises

In a change to immigration policy during 2012, "people younger than 30 who came to the UnitedStates before the age of 16, pose no criminal or security threat, and were successful students orserved in the military can get a two-year deferral from deportation", then-Homeland SecuritySecretary Janet Napolitano said, according to CNN, 06/16/2012. If many of these immigrants hadpreviously been afraid to work, now as a result of being able to work legally A)the short-run aggregate supply curve shifts rightward but potential GDP does not increase.B)the long-run aggregate supply curve shifts leftward and potential GDP decreases.C)the long-run aggregate supply curve shifts rightward and potential GDP increases.D)neither the short-run nor the long-run supply curve shifts.

C

In the figure above, the economy is at point A when the price level rises to 120. Money wage rate sand other resource prices remain constant. Firms are willing to supply output equal to A)$17.5 trillion. B)$18.0 trillion. C)$18.5 trillion. D)None of the above answers is correct.

C)$18.5 trillion.

If a $75 billion increase in autonomous expenditure increases equilibrium expenditure by $150billion, then the multiplier must be A)$225 billion. B)0.5. C)2. D)$75 billion.

C)2.

In the above figure, which movement illustrates the impact of the price level and money wage rate falling at the same rate? A)E to G B)E to H C)E to J D)E to K

C)E to J

In the above figure, the economy is initially at point B. If the Fed decreases the quantity of money, there is A)a movement to point C. B)a movement to point A. C)a shift to AD2. D)a shift to AD1.

C)a shift to AD2.

In the above figure, the economy is initially at point B. If the government decreases transfer payments, there is A)a movement to point C. B)a movement to point A. C)a shift to AD2. D)a shift to AD1.

C)a shift to AD2.

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

C)an increase in government expenditure

All of the following shift the LAS curve EXCEPT A)a change in the capital stock. B)technological progress. C)an increase in the money wage rate. D)an increase in the stock of human capital.

C)an increase in the money wage rate.

When real GDP exceeds potential GDP, then the economy has A)a below-full-employment equilibrium. B)a recessionary gap. C)an inflationary gap. D)None of the above answers are correct.

C)an inflationary gap.

Which of the following shifts the short-run aggregate supply curve? I.changes in the size of the labor force II.changes in the money wage rate A)I only B)II only C)both I and II D)neither I nor II

C)both I and II

For a household, the marginal propensity to save plus the marginal propensity to consume A)equals a number that is larger the larger the household's disposable income. B)equals the household's disposable income. C)equals 1. D)equals 0.

C)equals 1.

Autonomous consumption is that portion of consumption expenditure that is not influenced by A)the legal authorities. B)prices. C)income. D)preferences.

C)income.

Economic growth is best defined as A)rightward shifts of the AD curve. B)rightward shifts of the SAS curve. C)increases in potential GDP. D)decreases in potential GDP.

C)increases in potential GDP.

As the price level falls and other things remain the same, real wealth ________ and ________. A)decreases; the short-run aggregate supply decreases B)increases; aggregate demand increases C)increases; the quantity of real GDP demanded increases D)decreases; the quantity of real GDP demanded decreases

C)increases; the quantity of real GDP demanded increases

Business cycles are the result of A)regular shifts of both the AD and SAS curves. B)regular shifts of the AD curve only. C)irregular shifts of both the AD and SAS curves. D)irregular shifts of the SAS curve only.

C)irregular shifts of both the AD and SAS curves.

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

C)less than; greater than

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

C)real GDP and the price level are determined by short-run aggregate supply and aggregate demand.

At long-run macroeconomic equilibrium, A)an inflationary gap exists. B)real GDP is less than potential GDP but is as close as it is possible to be. C)real GDP equals potential GDP. D)a recessionary gap exists.

C)real GDP equals potential GDP.

When disposable income is 0, consumption is $2,000. Then A)saving = $2,000. B)the MPC = 0.2. C)saving =-$2,000. D)saving = $0.

C)saving =-$2,000.

When autonomous expenditure decreases, A)there is a movement down along the AE curve. B)the AE curve shifts upward. C)the AE curve shifts downward. D)the AE curve becomes less steep.

C)the AE curve shifts downward.

In the above figure, at a disposable income level of $2 trillion, saving equals (CF represents Consumption Function and B represents the 45 degree line) A)$4 trillion. B)consumption expenditure. C)zero. D)disposable income.

C)zero.

if the money wage rate increases, there is A)an upward movement along SAS. B)a downward movement along SAS. C)a shift to left. D)a shift to right.

C. A shift to left

1) An aggregate supply curve depicts the relationship between 1) A) the money wage rate and the quantity of real GDP supplied. B) the price level and the quantity of nominal GDP supplied. C) the price level and the quantity of real GDP supplied. D) household expenditures and household income

C.the price level and the quantity of real GDP supplied.

The table above gives the aggregate demand and aggregate supply schedules in Lotus Land. With no changes in aggregate demand or long-run aggregate supply, in long-run macroeconomic equilibrium, the price level will be ________ and real GDP will be ________. A)110; $500 B)90; $400 C)120; $400 D)100; $600

D)100; $600

For movements along the short-run aggregate supply curve3)A)the real wage rate changes.B)potential GDP remains constant.C)the money wage rate is constant. D)All of the above are correct.

D)All of the above are correct.

The short-run aggregate supply curve shifts when I. the full-employment quantity of capital changes. II. technology advances. A)I is true and II is false B)I is false and II is true C)I and II are both false D)I and II are both true

D)I and II are both true

Aggregate demand increases when A)the exchange rate rises. B)foreign incomes fall. C)interest rates rise. D)None of the above answers is correct.

D)None of the above answers is correct.

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)SAS curve shifts rightward and the LAS curve shifts rightward.

Equilibrium expenditure is defined as the level of aggregate expenditure where A)spending equals output. B)actual aggregate expenditure equals real GDP. C)total inventories equal zero. D)aggregate planned expenditure equals real GDP.

D)aggregate planned expenditure equals real GDP.

An increase in real GDP leads to A)a change in aggregate planned expenditure but whether the change is an increase or a decrease depends on whether nominal GDP increases or decreases. B)a decrease in aggregate planned expenditure. C)no change in aggregate planned expenditure. D)an increase in aggregate planned expenditure.

D)an increase in aggregate planned expenditure.

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)a decrease in the price level. C)a decrease in income. D)an increase in the price level.

D)an increase in the price level.

Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the A)direct relationship between the interest rate and the real value of wealth. B)inverse relationship between the interest rate and the price level. C)change in wealth that results from a change in the interest rate. D)effect on investment expenditures that result from a change in interest rates produced by a change in the price level.

D)effect on investment expenditures that result from a change in interest rates produced by a change in the price level.

If real disposable income increases by $1,500, consumption expenditures will A)stay constant. B)increase by more than $1,500. C)decrease by less than $1,500. D)increase by less than $1,500.

D)increase by less than $1,500.

In the above figure, the economy is initially at point B. Then the price level falls by 10. The wealth effect will help A)move the economy to point D. B)keep the economy at point B. C)move the economy to point C. D)move the economy to point A.

D)move the economy to point A.

The quantity of real GDP supplied depends on the A)quantity of capital, bonds, and stocks. B)price level, the unemployment rate, and the quantity of government expenditures on goodsand services. C)level of aggregate demand. D)quantity of labor, the quantity of capital, and the state of technology.

D)quantity of labor, the quantity of capital, and the state of technology.

Technological progress will A)shift the SAS curve rightward but will not shift the LAS curve. B)shift the LAS curve rightward but will not shift the SAS curve. C)not shift either the LAS or the SAS curve. D)shift both the LAS and SAS curves rightward.

D)shift both the LAS and SAS curves rightward.

If the MPC increases from 0.75 to 0.80 and there are no income taxes or imports A)the multiplier becomes smaller. B)the slope of the savings function becomes larger. C)the slope of the consumption function becomes smaller. D)the multiplier becomes larger.

D)the multiplier becomes larger.