Macro chapt 11+12

If firms set prices and
then keep them fixed for a period of time, their fixed prices imply that
A) the aggregate price level is fixed and that aggregate demand determines the
quantity of goods and services sold.
B) prices are set by aggregate demand and supply.
C) the aggregate price level adjusts continuously.
D) the aggregate price level is fixed and that aggregate supply determines the
quantity of goods and services sold.

The consumption function
relates consumption expenditure to
A) the interest
rate.
B) disposable income.
C)
saving.
D) the price level.

The marginal propensity
to consume
A) is negative if dissaving is present.
B) is between 0 and 1.
C) equals 1.
D) exceeds 1.

If consumption
expenditures for a household increase from $1000 to $1800 when disposable
income rises from $1000 to $2000, the marginal propensity to consume is
A)
0.8.
B) 0.5.
C)
0.3.
D) 0.2.

If the marginal
propensity to consume is 0.8, every $10 increase in disposable income increases

A) consumption expenditure by $0.80.
B) consumption expenditure by $18.00.
C) saving by $0.20.
D) consumption expenditure by $8.00.

If wealth increases, the consumption function
A) shifts
upward.
B) shifts downward.
C) is
unaffected.
D) has a steeper slope.

Read the two statements
below and indicate if they are true or false. I. Autonomous expenditures change
when GDP changes. II. Aggregate planned expenditure is the sum of planned
consumption expenditure, investment, government purchases, and net exports.
_______
A) I and II are both
true.
B) I and II are both false.
C) I is true and II is
false
D) I is false and II is true.

Autonomous expenditure
is not influenced by
A) the price level.
B) the interest rate.
C) real
GDP.
D) any other variable.

A decrease in
autonomous consumption will
A) shift the aggregate expenditure function downward.
B) decrease the marginal propensity to save.
C) shift the consumption function upward.
D) change the slope of the consumption function.

When the economy is in
equilibrium,
A) planned investment equals actual investment.
B) planned savings will equal zero.
C) there can be no unemployment.
D) changes in autonomous spending will have no impact on national income.

The multiplier effect
exists because a change in autonomous expenditure
A) leaves the economy in the form of imports.
B) leads to identical changes in income, which generate further spending.
C) prompts further exports.
D) will undergo its complete effect in one round.

AThe larger the MPC, the

A) larger the value of the multiplier.
B) smaller the value of the multiplier.
C) less likely that the multiplier will be affected.
D) more likely that the multiplier will be inconsequential.

If investment increases
by $300 and, in response, equilibrium aggregate expenditure increases by $600,
the multiplier is
A)
0.2.
B)
0.5.
C) 2.
D) 5.

Suppose that the MPC =
0.75 and there are no taxes or imports. Then a $100 decrease in autonomous
spending causes equilibrium expenditure to
A) decrease by
$400.
B) increase by $400.
C) decrease by
$750.
D) increase by $750.

Consumption expenditure:
C = 8 + 0.7Y
Investment: I = 5
Government purchases: G = 7
Exports: X = 10
Imports: M= 0.2Y

The equations above
describe the economy of La La Land. What is the equation for the aggregate
expenditure curve?
A) AE = 13 +
0.5Y
B) AE = 30 - 0.5Y
C) AE = 30 +
0.5Y
D) AE = 30 + 0.9Y

The marginal propensity
to import is the ________ that is spent on imports.
A) fraction of an increase in real GDP
B) total amount of real GDP
C) total amount of potential GDP
D) fraction of an increase in potential GDP

MISSED PROBLEMS CHAPTER 11: 3,4,13,14,15,16,21,22,23

If the economy
experiences inflation,
A) aggregate demand increases faster than potential GDP.
B) aggregate demand increases more slowly than potential GDP.
C) short-run aggregate supply increases faster than aggregate demand.
D) aggregate demand and short-run aggregate supply increase at about the same
rate.

Inflation can be
described as
A) a stock variable.
B) a flow variable.
C) an ongoing process of price level increases.
D) an excess demand for money.

When aggregate demand
persistently grows at a rate that exceeds the growth rate of potential GDP, the
economy will experience ________.
A) a slowdown in the economic growth rate
B) rising wage rates
C) persistent full-employment
D) persistent inflation

Demand-pull inflation
starts with
A) a decrease in aggregate demand.
B) an increase in aggregate demand.
C) a decrease in aggregate supply.
D) an increase in aggregate supply.

An increase in ________
could start a demand-pull inflation?
A) the quantity of money.
B) government expenditures.
C) exports.
D) All of the above answers are correct.

Increases in the
quantity of money can start a ________ inflation and an increase in government
expenditure can start a ________ inflation.
A) demand-pull; demand-pull
B) demand-pull; cost-push
C) cost-push; cost-push
D) cost-push; demand-pull

Initially, demand-pull
inflation will
A) increase the price level but not real GDP.
B) increase both the price level and real GDP.
C) increase the price level, but decrease real GDP.
D) shift the aggregate supply curve rightward.

A demand-pull inflation
can be described as ________ shifts in the AD curve and ________ shifts in the
SAS curve.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

As the money wage rate
rises,
A) the long-run aggregate supply curve shifts rightward.
B) the short-run aggregate supply curve shifts rightward.
C) both the long-run aggregate supply curve and the short-run aggregate supply
curve shift leftward.
D) the short-run aggregate supply curve shifts leftward.

The main sources of
cost-push inflation are increases in
A) money wage rates and the cost of raw materials.
B) real wage rates and the cost of raw materials.
C) money wage rates and aggregate demand.
D) aggregate demand and real wage rates.

Cost-push inflation can
start with
A) a decrease in investment.
B) an increase in oil prices.
C) an increase in government expenditures.
D) a decrease in the quantity of money.

A one-time increase in
oil prices without any following change in aggregate demand produces
A) stagflation.
B) demand-pull inflation.
C) an increase in the money wage rate that exceeds the percentage increase in
the price level.
D) a one-time fall in the price level.

Stagflation occurs when
the price level ________ and real GDP ________.
A) falls; increases
B) falls; decreases
C) rises; decreases
D) rises; increases

For a cost-push
inflation to occur, oil price increases must be accompanied by
A) decreased investment spending.
B) lower personal tax rates.
C) increases in the quantity of money.
D) increases in government expenditures.

In a demand-pull
inflation, the AD curve shifts ________ and the SAS curve shifts ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

The Phillips curve
shows the relationship between the
A) nominal interest rate and the real interest rate.
B) expected rate of inflation and the nominal interest rate.
C) real interest rate and the unemployment rate.
D) unemployment rate and the inflation rate.

A Phillips curve shows
the relationship between the
A) price level and real GDP.
B) unemployment rate and real GDP.
C) inflation rate and the unemployment rate.
D) inflation rate and real GDP.

The short-run Phillips
curve
A) slopes downward.
B) slopes upward.
C) is horizontal.
D) is vertical.

An increase in the
expected inflation rate shifts the
A) short-run Phillips curve downward.
B) short-run Phillips curve upward.
C) long-run Phillips curve upward.
D) long-run Phillips curve downward.

The long-run Phillips
curve
A) slopes downward.
B) slopes upward.
C) is horizontal.
D) is vertical.

The short-run Phillips
curve intersects the long-run Phillips curve at the
A) natural interest rate.
B) nominal interest rate.
C) natural inflation rate.
D) expected inflation rate.

In the above figure, suppose
that the economy currently is at point A. If the inflation rate rises and this
rise is NOT anticipated by the public, the economy moves to a point such as
point
A) B.
B) C.
C) D.
D) E.

The short-run Phillips
curve shows the ________ relationship between ________.
A) negative; unemployment and real GDP
B) positive; unemployment and real GDP
C) negative; inflation and unemployment
D) positive; real GDP and inflation

A decrease in the
expected inflation rate leads to ________ in the long-run Phillips curve and
________ in the short-run Phillips curve.
A) an upward shift; no shift
B) a leftward shift; an upward shift
C) no shift; no shift
D) no shift; a downward shift

The long-run Phillips
curve is ________.
A) horizontal at the expected inflation rate
B) vertical at the natural unemployment rate
C) horizontal at the actual inflation rate
D) vertical at the actual inflation rate

According to ________
the business cycle is the result of shifts in the economy's AD curve.
A) the Keynesian cycle theory only
B) only the Keynesian and monetarist cycle theories
C) the Keynesian, monetarist, and real business cycle theories
D) the Keynesian, monetarist, and new classical cycle theories

Keynes used the term
"animal spirits" to refer to the
A) animalistic behavior of investors.
B) irrational behavior of financial markets.
C) volatility of business confidence.
D) all of the above

In monetarist business
cycle theory, increases in money growth temporarily ________ real GDP and
________ the price level.
A) increase; rise
B) increase; lower
C) decrease; rise
D) decrease; lower

MISSED CHAPTER 12: 8,23