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Exam 14: Aggregate Demand and Aggregate Supply

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Question 31

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The marginal propensity to consume for an economy is 0.8. When the government injects $200 into the economy by purchasing military equipment, the total spending in the economy increases by $1,000. Given this scenario, which of the following statements is FALSE for the economy?

A) The marginal propensity to save is 0.2.
B) Savings are not the only source of leakage.
C) The spending multiplier is 5.
D) The spending multiplier is more than 5.

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Question 32

Multiple Choice

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When an economy is operating on the classical range on the short-run aggregate supply curve, a decrease in _____ will NOT lead to a decrease in equilibrium price.

A) money supply
B) income taxes
C) discretionary government spending
D) exports to foreign countries

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Question 33

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Use Figure: Macroeconomic Equilibrium. This figure shows four different macroeconomic equilibria for an economy. Which of the following can shift the macroeconomic equilibrium from point A to point B? ​ Figure: Macroeconomic Equilibrium

The short-run aggregate supply curve is perfectly inelastic in the classical range because:

Which one of the following will increase aggregate supply, thereby shifting the curve right?

If short-run output is greater than potential output, then:

In an economy that has no leakages except savings, the government injects $200 of new spending into the economy, and the total spending in the economy increases by $1,000. The spending multiplier in the economy is _____, and the marginal propensity to consume is:

If short-run output is less than the potential output, then:

If the short-run macroeconomic equilibrium occurs in the upward-sloping range of the short-run aggregate supply curve, then an increase in government spending will lead to:

The total investment spending in an economy decreases as a result of an increase in the interest rate, which is driven by an increase in the overall price level. This will be represented as a:

According to the interest rate effect, a higher price level implies a _____ demand for money, which leads to a _____ interest rate and a lower planned investment spending.

The long-run aggregate supply curve is:

Aggregate demand includes the demand for all goods and services in an economy EXCEPT the goods and service that are:

If the marginal propensity to save for an economy is 0.2, then the marginal propensity to consume for the economy is:

Economic growth is depicted by a:

Which one of the following can lead to a rightward shift of the long-run aggregate supply curve?

If the short-run output is more than the potential output, then in the long run, the nominal wage will _____ and output will:

Use Figure: Long-Run Aggregate Supply Curve. The figure shows two long-run aggregate supply curves for an economy. Which of the following CANNOT lead to a shift from long-run aggregate supply curve 1 to long-run aggregate supply curve 2? ​ Figure: Long-Run Aggregate Supply Curve

Which one of the following would constitute a positive supply shock?

The short-run aggregate supply curve is: