Macro Economics

Please answer with A-E on multiple choice questions T/F on true false Thank you! EXHIBIT PICTURES ARE POSTED IN THE FILES ATTACHED. Q24-25 are the same exhibit and same with Q8-9. pictures are labeled/named Ex for exhibit and q# for the question numbers.

1. The aggregate demand curve shows how real GDP purchased varies with changes in:
Group of answer choices

unemployment.

output.

the price level.

the interest rate.
2. Which of the following is not a component of the aggregate demand curve?
Group of answer choices

Government spending (G).

Investment (I).

Consumption (C).

Net exports (XM).

Saving.
3. The real balances or wealth effect occurs because a higher price level will reduce the real value of people’s:
Group of answer choices

financial assets.

wages.

unpaid debt.

physical investments.
4. The interestrate effect is the impact on real GDP caused by the ________ relationship between the price level and the interest rate.
Group of answer choices

direct

independent

linear

inverse
5. The net exports effect is the ________ relationship between net exports and the price level of an economy.
Group of answer choices

inverse

independent

direct

linear
6. Which of the following would shift the aggregate demand curve to the left?
Group of answer choices

An increase in exports.

An increase in investment.

An increase in government spending.

A decrease in government spending.
7. Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:
Group of answer choices

both real GDP and the price level will fall.

real GDP will fall and the price level will rise.

real GDP will rise and the price level will fall.

both real GDP and the price level will rise.
8.
In Exhibit 1, resources are fully employed, and competition among producers for resources will lead to a higher price level in:

Group of answer choices

the segment labeled ab.

the segment labeled bc.

the segment labeled cd.

both segment bc and segment cd
9. In Exhibit 1, as production increases, firms resort to offering higher wage rates to attract the dwindling supply of unemployed resources in:

Group of answer choices

the segment labeled ab.

the segment labeled bc.

the segment labeled cd.

both segment bc and segment cd.
10. An increase in oil prices will shift the aggregate:
Group of answer choices

demand curve leftward.

demand curve rightward.

supply curve leftward.

supply curve rightward.
11. Stagflation is a period of time when the economy is experiencing:
Group of answer choices

inflation and low unemployment.

high unemployment and low levels of inflation at the same time.

high inflation and high unemployment at the same time.

low inflation and low unemployment at the same time.

12.

The shift from AS1 to AS2 in Exhibit 2 could be caused by a(an):

Group of answer choices

sudden increase in the price of oil.

increase in input prices for most firms.

increase in workers’ wages.

all of the answers are incorrect.
13. As the economy moves to the right in Exhibit 3 along the upward-sloping aggregate supply curve the:

Group of answer choices

unemployment rate rises.

unemployment rate falls.

inflation rate falls.

none of the answers are correct.
14.As the aggregate demand curve shifts from AD1 to AD2 in Exhibit 3, the economy experiences:

Group of answer choices

cost-push inflation.

demand-pull inflation.

wage-push inflation.

hyperinflation.
15. The aggregate demand curve slopes downward because of the real balances, interest-rate, and net exports effects.
Group of answer choices

True

False
16. The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government spending, and net exports.
Group of answer choices

True

False
17. The Keynesian range of the aggregate supply curve applies when the economy is at or near full employment.
Group of answer choices

True

False
18. The classical economists believed there was no role for government to play in restoring full employment.
Group of answer choices

True

False
19. The aggregate supply curve is vertical at the level of real GDP that corresponds to the natural rate of unemployment.
Group of answer choices

True

False
20. A leftward shift in the aggregate supply curve along a fixed aggregate demand curve will cause cost-push inflation.
Group of answer choices

True

False
21. Which of the following is an example of expansionary fiscal policy?
Group of answer choices

Increase taxes.

Decrease government spending.

Increase government spending.

Increase taxes and decrease government spending equally.
22. In the ________ range of the aggregate supply curve, expansionary fiscal policy causes aggregate ________ to increase, which results in a higher price level and a higher equilibrium level of real GDP.
Group of answer choices

Keynesian, supply

classical, demand

intermediate, demand

intermediate, supply
23. An expansionary fiscal policy:
Group of answer choices

may include increases in government spending.

may include discretionary increases in transfer payments.

may include reductions in taxes.

All of the answers are correct.
24. Suppose the economy in Exhibit 1 is in equilibrium at point E1 and the marginal propensity to consume (MPC) is 0.80. Following Keynesian economics, to restore full employment, the government should increase its spending by:

Group of answer choices

$200 billion.

$250 billion.

$500 billion.

$100 billion
25. Beginning at equilibrium E1 in Exhibit 1, when the government increases spending or cuts taxes the economy will experience:

Group of answer choices

an inflationary recession.

stagflation.

cost-push inflation.

demand-pull inflation.
26. Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume (MPC) is given by the formula:
Group of answer choices

a. MPC – 1.

b. (MPC – 1)/MPC.

c. 1/MPC.

d. 1-[1/(1 – MPC)].
27. A tax multiplier equal to -4.30 would imply that a $100 tax increase would lead to a:
Group of answer choices

$430 decline in real GDP.

$430 increase in real GDP.

4.3 percent increase in real GDP.

4.3 percent decrease in real GDP.

43 percent decrease in real GDP.
28. Equal increases in government spending and taxes will:
Group of answer choices

cancel each other out so that the equilibrium level of real GDP will remain unchanged.

lead to an equal decrease in the equilibrium level of real GDP.

lead to an equal increase in the equilibrium level of real GDP.

lead to an increase in the equilibrium level of real GDP output that is larger than the initial change in government spending and taxes.
29. When the economy enters a recession, automatic stabilizers create:
Group of answer choices

higher taxes.

more discretionary spending.

budget deficits.

budget surpluses.
30. Unemployment compensation payments:
Group of answer choices

rise during a recession and thus reduce the severity of the recession.

rise during a recession and thus increase the severity of the recession.

rise during inflationary episodes and thus reduce the severity of the inflation.

fall during a recession and thus increase the severity of the recession.

31. According to supply-side fiscal policy, reducing tax rates on wages and profits will:
Group of answer choices

create demand-pull inflation.

lower the price level but may trigger a recession.

result in stagflation.

reduce both unemployment and inflation.
32. Supply-side economics calls for:
Group of answer choices

lower taxes on businesses and individuals.

regulatory reforms to increase productivity.

government subsidies to promote technological advance.

All of the answers are correct.
33. According to the Laffer Curve, when the income tax rate is 100 percent, tax revenue will be:
Group of answer choices

0.

at the maximum value.

the same as it would be at a 50 percent tax rate.

greater than it would be at a 50 percent tax rate.

the same as it would be at a 20 percent tax rate.
34. Assume the marginal propensity to consume (MPC) is 0.75 and the government increases taxes by $250 billion. The aggregate demand curve will shift to the:
Group of answer choices

left by $1,000 billion.

right by $1,000 billion.

left by $750 billion.

right by $750 billion
35. The tax multiplier is equal to the spending multiplier.
Group of answer choices

True

False
36. A simultaneous $10 million increase in both taxes and government spending will have no net effect on aggregate demand.
Group of answer choices

True

False

37. The Laffer curve represents the relationship between real GDP and various possible tax rates.
Group of answer choices

True

False
38. Supply-side fiscal policies focus on improving the incentives to work, save, and invest.
Group of answer choices

True

False
39. Contractionary fiscal policy is designed to combat demand-pull inflation and consists of a decrease in government spending and/or an increase in taxes.
Group of answer choices

True

False
40. Automatic stabilizers are government programs that tend to push the federal budget toward surplus as the real GDP rises and toward deficit as the real GDP falls.
Group of answer choices

True

False