Macro Economics final
In the intermediate range of the aggregate supply curve, if government spending increases caused the aggregate demand curve to shift outwards, which of the following is most likely to occur? A. The price level and real GDP will both rise. B. The price level will not change, but real GDP will increase. C. The price level will rise, but real GDP will not change. D. Both the price level and real GDP will not change.
A. The price level and real GDP will both rise.
Which of the following is the most liquid store of purchasing power? A. a dollar bill B. common stock C. gold D. real estate
A. a dollar bill
A movement along in the consumption function is caused by a change in: A. real disposable income. B. the price level. C. the marginal propensity to consume (MPC). D. consumer wealth.
A. real disposable income.
The seven members of the Board of Governors serve 14-year terms to: A. reduce political influence. B. provide steady employment. C. inhibit independent decisions. D. prevent illegal appointments.
A. reduce political influence.
The ratio of the change in GDP to an initial change in aggregate expenditures (AE) is the: A. spending multiplier. B. permanent income rate. C. marginal expenditure rate. D. marginal propensity to consume
A. spending multiplier.
Which of the following is the best example of an automatic stabilizer? A. welfare payments B. foreign aid C. defense spending D. highway construction
A. welfare payments
Assume Congress enacts a $500 billion increase in spending and a $500 billion tax increase to finance the additional government spending. The result of this balanced-budget approach is a: A. $500 billion decrease in aggregate demand. B. $500 billion increase in aggregate demand. C. $1,000 billion increase in aggregate demand. D. $1,000 billion decrease in aggregate demand.
B. $500 billion increase in aggregate demand.
The formula to compute the spending multiplier is: A. 1 / (MPC + MPS). B. 1 / (1 − MPC). C. 1 / (1 − MPS). D. 1 / (C + I).
B. 1 / (1 − MPC).
Which of the following is responsible for controlling the money supply in the United States? A. U.S. Congress B. Board of Governors of the Federal Reserve System C. U.S. Treasury D. Council of Economic Advisors
B. Board of Governors of the Federal Reserve System
In the upward-sloping segment of the aggregate supply curve, A. increases in output are linked to decreases in the price level. B. firms are willing to pay higher wages to get more labor. C. producers can hire more workers without having to raise the wage rate. D. the economy can increase aggregate supply without prices going up.
B. firms are willing to pay higher wages to get more labor.
The consumption function will shift upward if real asset and money holdings: A. increase, if people expect prices to increase, if interest rates decrease, and if taxes decrease. B. increase, if people expect prices to increase, if interest rates increase, and if taxes increase. C. increase, if people expect prices to increase, if interest rates increase, and if taxes decrease. D. decrease, if people expect prices to decrease, if interest rates decrease, and if taxes decrease.
B. increase, if people expect prices to increase, if interest rates increase, and if taxes increase.
When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program, such as new interstate highway construction, the: A. tax, then, generates a $100 million decline in real GDP. B. level of real GDP expands by $100 million. C. effect on real GDP is uncertain. D. tax multiplier overpowers the income multiplier, triggering a rollback in real GDP.
B. level of real GDP expands by $100 million.
The investment demand curve as a function of various possible interest rates for the entire economy is assumed to be: A. positively sloped. B. negatively sloped. C. rising, then falling. D. falling, then rising.
B. negatively sloped.
If aggregate demand increases in the intermediate range of the aggregate supply curve then the: A. price level rises and real GDP falls. B. price level rises and real GDP rises. C. price level falls and real GDP falls. D. price level falls and real GDP rises.
B. price level rises and real GDP rises.
Which of the following is not one of the functions of the Federal Reserve? A. clearing checks B. printing currency C. supervising and regulating banks D. controlling the money supply
B. printing currency
Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n): A. inflationary gap. B. recessionary gap. C. negative GDP gap. D. marginal propensity to consume gap.
B. recessionary gap.
M1 money includes all but which one of the following? A. checkable deposits B. savings accounts C. paper money D. coins
B. savings accounts
Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a: A. medium of exchange. B. unit of account. C. store of value. D. tore of coincidence.
B. unit of account.
Assume that an economy's spending multiplier is 4. If this economy is in equilibrium at $2,000 billion, then which one of the following actions will bring it to a full-employment equilibrium of $1,500 billion? A. $500 billion spending cut. B. $500 billion spending increase. C. $125 billion spending cut. D. $125 billion spending increase.
C. $125 billion spending cut.
Suppose equilibrium real GDP is currently at $800 billion and investment is $100 billion. If an increase in the interest rate reduces investment from $100 billion to $75 billion, and the MPC is 0.8, the new level of equilibrium real GDP will be: A. $500 billion. B. $600 billion. C. $675 billion. D. $775 billion.
C. $675 billion.
If the marginal propensity to consume (MPC) is 0.75 and if policy makers wish to increase real GDP by $300 million to fight a recession, then by how much would taxes have to change? A. -$30 million B. -$50 million C. -$100 million D. -$300 million
C. -$100 million
If the marginal propensity to save (MPS) is 0.25, the value of the spending multiplier is: A. 1. B. 2. C. 4. D. 9.
C. 4.
Which of the following events is the most likely to create stagflation? A. An increase in the money supply. B. reduction in the amount spent on national defense. C. A doubling of oil prices. D. A decrease in investment spending.
C. A doubling of oil prices.
The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows: A. Unemployment is not possible in the short run. B. Demand and supply are never equal. C. Supply creates its own demand. D. Demand creates its own supply.
C. Supply creates its own demand.
Which of the following groups believes that the economy can achieve full employment without inflation through tax reductions, lower resource prices, and deregulation? A. Classical school B. Keynesian school C. Supply-side school D. Rational expectations school
C. Supply-side school
Suppose the economy is on the intermediate range of the aggregate supply curve. Which of the following would reduce both real GDP and the price level? A. a decrease in aggregate supply B. an increase in aggregate supply C. a decrease in aggregate demand D. an increase in aggregate demand
C. a decrease in aggregate demand
The primary functions of money are: A. velocity, liquidity, and transactions. B. speculative demand, measure of value, and precautionary demand. C. a medium of exchange, a unit of account, and a store of value. D. a store of value, heterogeneity, and a medium of exchange.
C. a medium of exchange, a unit of account, and a store of value.
Programs that automatically increase government spending (relative to revenue) during a recession and automatically decrease government spending (relative to revenue) during an economic boom are called: A. discretionary fiscal policy. B. supply-side programs. C. automatic stabilizers. D. tax credits.
C. automatic stabilizers.
A $2,000 decrease in investment will shift the aggregate expenditures curve down by: A. exactly $2,000 and will decrease the equilibrium level of real GDP by exactly $2,000. B. exactly $2,000 and will decrease the equilibrium level of real GDP by less than $2,000. C. exactly $2,000 and will decrease the equilibrium level of real GDP by more than $2,000. D. less than $2,000 and will decrease the equilibrium level of real GDP by less than $2,000.
C. exactly $2,000 and will decrease the equilibrium level of real GDP by more than $2,000.
A $500 increase in investment will shift the aggregate expenditures curve up by: A. exactly $500 and will increase the equilibrium level of real GDP by exactly $500. B. exactly $500 and will increase the equilibrium level of real GDP by less than $500. C. exactly $500 and will increase the equilibrium level of real GDP by more than $500. D. more than $500 and will increase the equilibrium level of real GDP by more than $500.
C. exactly $500 and will increase the equilibrium level of real GDP by more than $500.
Classical economic theory predicted that in the long run the economy would experience: A. below full unemployment. B. rising rate of inflation. C. full employment. D. idle factors of production.
C. full employment.
A barter economy is one in which: A. money serves as a medium of exchange. B. only precious metals are accepted as money. C. goods are traded directly for other goods. D. paper money is backed by gold.
C. goods are traded directly for other goods.
When the price level falls, the total quantities of goods and services demanded: A. decrease. B. stay the same. C. increase. D. increases and then decreases.
C. increase.
The Federal Deposit Insurance Corporation: A. has eliminated bank failures. B. insures all demand deposits without limit. C. insures all demand deposits up to $250,000. D. includes commercial banks and state-chartered banks as its members.
C. insures all demand deposits up to $250,000.
John Maynard Keynes's central proposition that a dollar increase in disposable income would increase consumption, but by less than the increase in disposable income, means the marginal propensity to consume (MPC) is: A. greater than or equal to one. B. equal to one. C. less than one, but greater than zero. D. negative.
C. less than one, but greater than zero.
Which of the following is not counted as part of M1? A. coins B. Federal Reserve notes or "paper money" C. passbook savings deposits D. checkable deposits
C. passbook savings deposits
An advantage of automatic stabilizers is that this type of fiscal policy A. requires precise knowledge of full-employment real GDP. B. can be influenced by special B. interest groups when their concerns are valid. C. reduces swings in real GDP. D. accelerates the direction in which the economy is moving at the time.
C. reduces swings in real GDP.
Unemployment compensation payments: A. rise during a recession and thus reduce the severity of the recession. B. rise during a recession and thus increase the severity of the recession. C. rise during inflationary episodes and thus reduce the severity of the inflation. D. fall during a recession and thus increase the severity of the recession.
C. rise during inflationary episodes and thus reduce the severity of the inflation.
Lower taxes on businesses will shift the aggregate: A. demand curve rightward. B. demand curve leftward. C. supply curve rightward. D. supply curve leftward.
C. supply curve rightward.
Which of the following is the most important protection against fears of bank collapse? A. the Federal Reserve B. the Federal Reserve Open Market Committee C. the Federal Deposit Insurance Corporation D. the gold and silver that backs Federal Reserve notes
C. the Federal Deposit Insurance Corporation
The Federal Reserve System is owned by: A. federal government agencies such as the Treasury. B. the Congress of the United States. C. the banks that are members of the Federal Reserve System. D. anyone who buys stock over the counter.
C. the banks that are members of the Federal Reserve System.
The aggregate demand curve shows how real GDP purchased varies with changes in: A. unemployment. B. the price of a particular good. C. the overall price level. D. the interest rate.
C. the overall price level.
The statement that ABC Co.'s profits totaled $500 million last year represents the use of money as a: A. medium of exchange. B. store of value. C. unit of account. D. means of coincidence.
C. unit of account.
The Federal Deposit Insurance Corporation (FDIC): A. insures all demand deposit accounts up to $10 million in banks choosing FDIC protection. B. was created as a government-owned corporation following the creation of the World Bank and the International Monetary Fund after World War II. C. was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading. D. creates monetary policy in conjunction with the Federal Reserve Board.
C. was created to reduce the risk of banking by compensating depositors and keeping bank failures from spreading.
In the aggregate expenditures model, if aggregate expenditures (AE) are greater than GDP, then: A. inventory is unchanged. B. inventory is accumulated. C. employment decreases. D. GDP increases.
D. GDP increases.
Suppose you transfer $1,000 from your checking account to your savings account. How does this action affect the M1 and M2 money supplies? A. M1 and M2 are both unchanged. B. M1 falls by $1,000, and M2 rises by $1,000. C. M1 is unchanged, and M2 rises by $1,000. D. M1 falls by $1,000, and M2 is unchanged.
D. M1 falls by $1,000, and M2 is unchanged.
M2 refers to: A. the most narrowly defined money supply definition. B. currency held by the public minus checking account balances. C. the smallest of the money-supply definitions. D. M1 plus near monies.
D. M1 plus near monies.
In its function of controlling the money supply, the Fed does not do which one of the following? A. Controls the money supply. B. Clears checks. C. Regulates banks. D. Offer checking accounts to the public.
D. Offer checking accounts to the public.
Suppose that consumers become more pessimistic about the future and, as a result, reduce their consumption by $10 billion. If the marginal propensity to consume is 0.80, how will this $10 billion reduction in consumption affect the equilibrium level of real GDP? A. Real GDP will decrease by $8 billion. B. Real GDP will decrease by $10 billion. C. Real GDP will decrease by $40 billion. D. Real GDP will decrease by $50 billion.
D. Real GDP will decrease by $50 billion.
Which of the following explains why a $100 billion reduction in consumption spending might decrease equilibrium real GDP by more than $100 billion? A. Say's law. B. The quantity theory of money. C. Flexible resource prices. D. The multiplier principle.
D. The multiplier principle.
In the classical range of the aggregate supply curve, greater spending for consumer and investment goods results in: A. stagflation. B. more unemployment. C. greater output. D. a higher price level.
D. a higher price level.
A primary emphasis of the Keynesian school is the economy has a tendency to: A. always create a full-employment level of output. B. always create inflationary pressure at all levels of output. C. eliminate unemployment by lowering wage rates to create an equilibrium in the labor market. D. be in equilibrium at less than full employment.
D. be in equilibrium at less than full employment.
Which of the following forms of money is the least liquid? A. dollars B. checking account deposits C. passbook savings D. certificates of deposit
D. certificates of deposit
The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium full employment is known as the: A. Keynesian school. B. supply-side school. C. rational expectations school. D. classical school.
D. classical school.
If the marginal propensity to consume (MPC) is 0.75, a $50 decrease in government spending, other things being equal, would cause equilibrium real GDP to: A. increase by $50. B. decrease by $50. C. increase by $200. D. decrease by $200.
D. decrease by $200.
According to Keynes, what is the most important determinant of households' spending on goods and services? A. the price level B. the interest rate C. autonomous consumption D. disposable income
D. disposable income
The Monetary Control Act of 1980: A. required banks to make home loans. B. eliminated many forms of competition among financial institutions. C. created sharper distinctions among various financial institutions. D. eliminated all interest rate ceilings.
D. eliminated all interest rate ceilings.
Keynesians: A. accept the countercyclical policy of doing nothing, that is, allowing market forces to work. b. believe that the level of aggregate demand in the 1930s was sufficient to generate full employment. C. accept the fact that policymakers should eliminate inflation first before focusing on unemployment. D. focus on increasing aggregate demand in order to stimulate the economy.
D. focus on increasing aggregate demand in order to stimulate the economy.
John Maynard Keynes and his followers argued that the Great Depression was primarily the result of: A. excessive government spending. B. large budget deficits. C. the perverse monetary policies of the Fed. D. insufficient aggregate spending on goods and services.
D. insufficient aggregate spending on goods and services.
If there are strong expectations of future economic growth, then the: A. economy will move to the right along the existing consumption function. B. economy will move to the left along the existing consumption function. C. consumption function will shift downward. D. investment demand curve will shift upward.
D. investment demand curve will shift upward.
Assume the marginal propensity to consume (MPC) is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the: A. left by $80 billion. B. right by $200 billion. C. right by $400 billion. D. left by $400 billion.
D. left by $400 billion.
The Federal Reserve System: A. was created by and is owned by the government. B. pursues independent fiscal policy at the behest of Congress. C. never acts to control inflation. D. pursues independent monetary policy which can conflict with the government's economic policy.
D. pursues independent monetary policy which can conflict with the government's economic policy.
M2 is equal to M1 plus: A. savings deposits, money market deposit accounts, small time deposits, and eurodollars. B. savings deposits, money market deposit accounts, money market mutual funds, and eurodollars. C. small time deposits, money market deposit accounts, money market mutual funds, and eurodollars. D. savings deposits and small time deposits of less than $100,000.
D. savings deposits and small time deposits of less than $100,000.
If the economy is experiencing unemployment, then the most appropriate government policy would be to: A. shift the aggregate demand curve by using a tax increase coupled with spending cuts. B. shift the aggregate demand curve by using a tax increase coupled with more spending. C. shift the aggregate supply curve by using a tax cut coupled with spending cuts. D. shift the aggregate demand curve by using a tax cut coupled with more spending.
D. shift the aggregate demand curve by using a tax cut coupled with more spending.
Other factors held constant, a decrease in resource prices will shift the aggregate: A. demand curve leftward. B. demand curve rightward. C. supply curve leftward. D. supply curve rightward.
D. supply curve rightward.
Within the Keynesian aggregate expenditure-output model, if an economy operates below full employment: A. a reduction in wage rates and resource prices will soon restore full-employment equilibrium. B. a reduction in the real interest rate will soon restore full-employment equilibrium. C. an increase in the real interest rate will soon restore full-employment equilibrium. D. the economy may remain below full employment unless aggregate expenditures increase.
D. the economy may remain below full employment unless aggregate expenditures increase.
The aggregate demand curve will shift rightward when there is: A. a decrease in government spending. B. a decrease in incomes abroad. C. a tax increase. D. the expectation that future consumer income will rise.
D. the expectation that future consumer income will rise.
The Keynesian analysis of fiscal policy argues that: A. fiscal policy should generally be expansionary except during periods of economic recession. B. fiscal policy should generally be restrictive except during inflationary booms. C. the federal budget should be balanced annually except during war. D. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
D. the federal budget should be used to maintain aggregate demand at a level consistent with full employment.
What is the "medium of exchange" function of money? A. a common measurement of the relative value of different goods and services B. the ability of money to hold value over time C. the quality of money not to be hoarded because of its commodity value D. the function of money to be widely accepted in exchange for goods and services
D. the function of money to be widely accepted in exchange for goods and services
To illustrate the classical argument that "supply creates its own demand," the aggregate supply curve should be drawn: A. downward-sloping. B. upward-sloping. C. horizontal. D. vertical.
D. vertical.
Which of the following options could be used to eliminate a recessionary gap? A. Decrease government spending B. Decrease consumption C. Decrease investment D. Decrease taxes
D. Decrease taxes
If your disposable personal income increases from $30,000 to $40,000 and your savings increases from $2,000 to $4,000, your marginal propensity to save (MPS) is: A. 0.2. B. 0.4. C. 0.5. D. 0.8.
A. 0.2.
Which of the following statements is true? A. Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. B. According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. C. The presence of the automatic stabilizers tends to destabilize the economy. D. To combat inflation, Keynesians recommend lower taxes and greater government spending.
A. Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.
Which of the following options could be used to eliminate a recessionary gap? A. Increase government spending. B. Decrease government spending. C. Decrease investment. D. Increase taxes.
A. Increase government spending.
When both inflation and unemployment are concerns, supply-side economists argue in favor of policies to shift the A. aggregate supply curve to the right and lower the CPI, while Keynesian fiscal policy would shift the aggregate demand curve to the right and increase the CPI. B. aggregate supply curve to the left and raise the CPI, while Keynesian fiscal policy would shift the aggregate demand curve to the left and decrease the CPI. C. aggregate supply curve to the right and lower the CPI, which is the same policy Keynesian economists would advocate. D. aggregate demand curve to the right because unemployment is a more important concern than inflation.
A. aggregate supply curve to the right and lower the CPI, while Keynesian fiscal policy would shift the aggregate demand curve to the right and increase the CPI.
An upward shift in the consumption function, other things being equal, could be caused by households: A. becoming optimistic about the state of the economy. B. becoming pessimistic about the state of the economy. C. expecting future income and wealth to decline. D. experiencing a tax increase.
A. becoming optimistic about the state of the economy.
Along the intermediate range of the aggregate supply curve, an increase in the aggregate demand curve will increase: A. both the price level and real GDP. B. only real GDP. C. only the price level. D. real GDP and reduce the price level.
A. both the price level and real GDP.
The dominant school of economic thought until midway through the Great Depression of the 1930s was: A. classical. B. Keynesian. C. monetarism. D. supply-side.
A. classical.
Superhighways, public housing facilities, and defense projects are all ways that the President can: A. close a recessionary gap B. close an inflationary gap C. combat inflation D. raise unemployment
A. close a recessionary gap
Barter is the: A. direct exchange of goods and services. B. exchange of goods, but not services. C. system that does not depend on a coincidence of wants. D. system used in advanced economies.
A. direct exchange of goods and services.
Gold is a perfect medium of exchange and measure of value because of its: A. divisibility, portability, and uniformity. B. divisibility and durability. C. durability and relative scarcity. D. durability and homogeneity.
A. divisibility, portability, and uniformity.
If the interest rate rises, then firms' investment spending: A. falls. B. also rises. C. remains unchanged. D. reacts unpredictably.
A. falls.
On the graph of GDP, government spending and net exports are: A. horizontal lines because they are autonomous expenditures. B. vertical lines because the level of spending is fixed. C. upward sloping because they increase as GDP increases. D. downward sloping because they decrease as GDP increases.
A. horizontal lines because they are autonomous expenditures.
The Monetary Control Act of 1980 extended the Fed's authority to: A. impose required-reserve ratios on all depository institutions. B. control the discount rate. C. control the federal funds rate. D. carry out a massive federal bailout of failed savings and loan institutions.
A. impose required-reserve ratios on all depository institutions.
A rightward shift of the investment demand curve would be caused by a(n): A. increase in the expected rate of return on investment caused by an increase in business confidence. B. decrease in the expected rate of return on investment caused by a decrease in business confidence. C. increase in the rate of interest. D. decrease in the rate of interest.
A. increase in the expected rate of return on investment caused by an increase in business confidence.
In the Keynesian model, if aggregate expenditures exceed aggregate output and inventories of firms fall, then the aggregate output and the business sector could be expected to: A. increase output. B. decrease output. C. decrease investment. D. hire fewer workers.
A. increase output.
When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the: A. interest-rate effect. B. real balance effect. C. investment effect. D. disinvestment effect
A. interest-rate effect.
In the aggregate expenditures model, if aggregate expenditures (AE) are greater than GDP, then: A. inventory is depleted. B. inventory is accumulated. C. inventory is unchanged. D. employment decreases.
A. inventory is depleted.
The net exports effect is the ____ relationship between net exports and the price level of an economy. A. inverse B. independent C. direct D. linear
A. inverse
In the Keynesian model, the larger the marginal propensity to consume, the: A. larger the multiplier. B. larger the marginal propensity to save. C. higher the income level of the economy. D. smaller the change in income derived from a given change in government spending.
A. larger the multiplier.
Which of the following types of financial institutions is required to belong to the Federal Reserve System? A. national banks B. state-chartered banks C. savings and loan institutions D. credit unions
A. national banks
The vertical portion of the aggregate supply curve shows that at full employment an increase in the price level will: A. not alter the economy's full-employment real GDP. B. increase the economy's full-employment real GDP. C. reduce the quantity of goods and services purchasers will demand. D. improve the overall efficiency of resource use.
A. not alter the economy's full-employment real GDP.
Which of the following correctly describes the difference between commodity money and fiat money? A. Fiat money has value based on the material from which it is made, while commodity money is accepted by law and not because of its tangible value. B. Commodity money is either made out of a valuable commodity like silver or gold, or is redeemable for a valuable commodity. Fiat money is not. C. Commodity money can only be used to buy commodities such as grains or lumber, while fiat money can be used to buy anything. D. Fiat money is used during times of emergency, such as hurricanes or war, when the existing stock of commodity money is inadequate to purchase needed goods and services.
B. Commodity money is either made out of a valuable commodity like silver or gold, or is redeemable for a valuable commodity. Fiat money is not.
Decisions to buy or sell securities at the Fed are made by the: A. Congress. B. Federal Open Market Committee. C. Federal Deposit Insurance Corporation. D. President's Council of Economic Advisors.
B. Federal Open Market Committee.
Which of the following provides the best explanation of why money is valuable? A. Money is valuable because it is indivisible. B. Money is valuable because it is scarce. C. Money is valuable because it is backed by precious metals, primarily gold and silver. D. Money is valuable because it has intrinsic value, independent of its use as a means of exchange.
B. Money is valuable because it is scarce.
Which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment? A. The rate of inflation would decline. B. The rate of inflation would rise. C. A recession would develop. D. Interest rates would fall.
B. The rate of inflation would rise.
When OPEC caused the price of oil to rise in the early 1970s, the: A. aggregate supply curve shifted to the right. B. aggregate supply curve shifted to the left. C. aggregate demand curve shifted to the right. D. aggregate demand curve shifted to the left.
B. aggregate supply curve shifted to the left.
Within the Keynesian aggregate expenditures model, if the economy is below equilibrium, then there will be: A. an increase the demand for goods and services. B. an increase in real GDP. C. lower interest rates, which will stimulate aggregate demand and keep the economy at full employment. D. a lower price level, which will quickly guide the economy to full-employment equilibrium.
B. an increase in real GDP.
Automatic stabilizers stabilize the level of real GDP because: A. Congress quickly changes spending and tax revenue. B. federal expenditures and tax revenues change as the level of real GDP changes. C. the spending and tax multiplier are constant. D. wages are controlled by the minimum wage law.
B. federal expenditures and tax revenues change as the level of real GDP changes.
