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.
A
The consumption function
relates consumption expenditure to
A) the interest
rate.
B) disposable income.
C)
saving.
D) the price level.
B
The marginal propensity
to consume
C)
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.
A
If the marginal
propensity to consume is 0.8, every $10 increase in disposable income increases
A)
If wealth increases, the consumption function
A) shifts
upward.
B) shifts downward.
C) is
unaffected.
D) has a steeper slope.
A
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.
D
Autonomous expenditure
is not influenced by
GDP.
D) any other variable.
C)
A decrease in
autonomous consumption will
C)
When the economy is in
equilibrium,
A)
The multiplier effect
exists because a change in autonomous expenditure
B)
AThe larger the MPC, the
D)
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.
C
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.
A
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
C
The marginal propensity
to import is the ________ that is spent on imports.
When aggregate demand
persistently grows at a rate that exceeds the growth rate of potential GDP, the
economy will experience ________.
D)
Demand-pull inflation
starts with
B)
An increase in ________
could start a demand-pull inflation?
D)
Increases in the
quantity of money can start a ________ inflation and an increase in government
expenditure can start a ________ inflation.
A)
Initially, demand-pull
inflation will
B)
A demand-pull inflation
can be described as ________ shifts in the AD curve and ________ shifts in the
SAS curve.
A)
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.
D
The main sources of
cost-push inflation are increases in
A)
Cost-push inflation can
start with
A)
A one-time increase in
oil prices without any following change in aggregate demand produces
the price level.
D) a one-time fall in the price level.
C)
Stagflation occurs when
the price level ________ and real GDP ________.
B)
For a cost-push
inflation to occur, oil price increases must be accompanied by
B)
In a demand-pull
inflation, the AD curve shifts ________ and the SAS curve shifts ________.
C)
The Phillips curve
shows the relationship between the
A)
A Phillips curve shows
the relationship between the
C)
The short-run Phillips
curve
C)
An increase in the
expected inflation rate shifts the
D)
The long-run Phillips
curve
B)
The short-run Phillips
curve intersects the long-run Phillips curve at the
C)
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
B)
The short-run Phillips
curve shows the ________ relationship between ________.
C)
A decrease in the
expected inflation rate leads to ________ in the long-run Phillips curve and
________ in the short-run Phillips curve.
D)
The long-run Phillips
curve is ________.
C)
According to ________
the business cycle is the result of shifts in the economy's AD curve.
D)
Keynes used the term
"animal spirits" to refer to the
C)
In monetarist business
cycle theory, increases in money growth temporarily ________ real GDP and
________ the price level.
