ECON
John MaynardKeynes expressed his ideas about the macroeconomy and attacked classicaleconomics in his book, The
Affluent Society.
Wealth of Nations.
Theory and Practice of Economicsin Capitalism.
D. General Theory of Employment, Interest,and Money.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
True / False Questions
One basic assumption of the aggregate expenditures model is that the price level in the economy isfixed.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-01 Explain how sticky prices relate to the aggregateexpenditures model.
Test Bank: II Topic: Assumptions and Simplifications
The major basic premiseof the aggregate expenditures model is that if the total demand for output increases, then firms will raise their prices.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-01 Explain how sticky prices relate to the aggregateexpenditures model.
Test Bank: II Topic: Assumptions and Simplifications
In the aggregate expenditures model of a private closed economy,we analyze a consumption schedule and an investmentschedule, both of which indicate that as income increases then consumption and investment will increase.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-02 Explain how an economys investment schedule is derived from the investment demand curve and an interestrate.
Test Bank: II Topic: Consumption and Investment Schedules
If the expected rates of return from investment decreasein an economy, there would most likely be a downward shift in the investment schedulefor that economy.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-02 Explain how an economys investment schedule is derived from the investment demand curve and an interestrate.
Test Bank: II Topic: Consumption and Investment Schedules
A rightwardshift of the investmentdemand curve translates into an upward shift of the investment schedule in the aggregateexpenditures model.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-02 Explain how an economys investment schedule is derived from the investment demand curve and an interestrate.
Test Bank: II Topic: Consumption and Investment Schedules
A downward-sloping investment demand curve and a horizontalinvestment schedule indicate that investments are inversely relatedto interest rates but are not affected by the level of income.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-02 Explain how an economys investment schedule is derived from the investment demand curve and an interestrate.
Test Bank: II Topic: Consumption and Investment Schedules
In the aggregate expenditures model of the economy, equilibrium is attained when planned aggregate spending equals total output.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-03 Illustrate how economists combine consumption and investment to depict an aggregateexpenditures schedule for a private closed economy and how that schedulecan be used to demonstrate the economys equilibrium level of outputwhere the totalquantity of goods produced equals the total quantity of goods purchased.
Test Bank: II Topic: EquilibriumGDP: C Ig = GDP
In the aggregate expenditures model of a privateclosed economy, aggregateexpenditures (C + Ig) is always equal to output GDP.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-03 Illustrate how economists combine consumption and investment to depict an aggregateexpenditures schedule for a private closed economy and how that schedulecan be used to demonstrate the economys equilibrium level of outputwhere the totalquantity of goods produced equals the total quantity of goods purchased.
Test Bank: II Topic: EquilibriumGDP: C Ig = GDP
In the aggregate expenditures model of a privateclosed economy, if aggregateexpenditures are greater than output or income, then real GDP will increase toward its equilibrium level.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-03 Illustrate how economists combine consumption and investment to depict an aggregateexpenditures schedule for a private closed economy and how that schedulecan be used to demonstrate the economys equilibrium level of outputwhere the totalquantity of goods produced equals the total quantity of goods purchased.
Test Bank: II Topic: EquilibriumGDP: C Ig = GDP
When a private closed economyis at equilibrium, then (GDP − C) is equal to planned investment.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-04 Discuss the two other ways to characterize the equilibrium level of real GDP in a privateclosed economy: saving = investment, and no unplanned changes in inventories.
Test Bank: II Topic: Other Features of Equilibrium GDP
When there are unplanned increasesin inventories, then actual investment ends up being less than plannedinvestment.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-04 Discuss the two other ways to characterize the equilibrium level of real GDP in a privateclosed economy: saving = investment, and no unplanned changes in inventories.
Test Bank: II Topic: Other Features of Equilibrium GDP
If planned investmentis larger than saving, then real GDP will increaseas the economy adjusts toward equilibrium.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-04 Discuss the two other ways to characterize the equilibrium level of real GDP in a privateclosed economy: saving = investment, and no unplanned changes in inventories.
Test Bank: II Topic: Other Features of Equilibrium GDP
In a closed private economy, an unplanned decrease in inventories will cause firms to increasereal GDP.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-04 Discuss the two other ways to characterize the equilibrium level of real GDP in a privateclosed economy: saving = investment, and no unplanned changes in inventories.
Test Bank: II Topic: Other Features of Equilibrium GDP
If the MPC in theeconomy is 0.7 and aggregate expenditures fall by $10 billion, then real GDP will fall by $17 billion.
FA LSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-05 Analyze how changesin equilibrium real GDP can occur in the aggregate expenditures model and describe how those changes relate to the multiplier.
Test Bank: II Topic: Changes in Equilibrium GDP and the Multiplier
If aggregateexpenditures rise by $200 billion and real GDP consequently rises by $500 billion, then the MPC in the economymust be 0.4.
FA LSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-05 Analyze how changes in equilibrium real GDP can occur in the aggregateexpenditures model and describe how those changes relate to the multiplier.
Test Bank: II Topic: Changes in Equilibrium GDP and the Multiplier
If households and firms in an economy would save all extra income that they receive so that MPC = 0, then the multiplier in that economyis zero.
FA LSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-05 Analyze how changesin equilibrium real GDP can occur in the aggregate expenditures model and describe how those changes relate to the multiplier.
Test Bank: II Topic: Changes in Equilibrium GDP and the Multiplier
The steeper is the consumption schedule in an economy,the larger will be the multiplier.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-05 Analyze how changesin equilibrium real GDP can occur in the aggregate expenditures model and describe how those changes relate to the multiplier.
Test Bank: II Topic: Changes in Equilibrium GDP and the Multiplier
Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domesticGDP.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-06 Explain how economists integrate the international sector exports and imports into the aggregateexpenditures model.
Test Bank: II Topic: Adding International Trade
An increase in imports, other things constant, would tend to raise the equilibrium level of GDP.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-06 Explain how economists integrate the international sector exports and imports into the aggregateexpenditures model.
Test Bank: II Topic: Adding International Trade
An increase in a lump-sum tax has the same effect on equilibrium GDP as an equal decreasein government purchases.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-07 Explain how economists integrate the public sector government expenditures and taxesinto the aggregateexpenditures model.
Test Bank: II Topic: Adding the Public Sector
If the government increases its purchasesby $200 billion but at the same time raises lump-sum taxes by $200 billion,then equilibrium GDP will remain constant.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-07 Explain how economists integrate the public sector government expenditures and taxesinto the aggregateexpenditures model.
Test Bank: II Topic: Adding the Public Sector
A decrease in taxes will have a larger effect on equilibrium GDP if themarginal propensity to consume is smaller.
FA LSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 11-07 Explain how economists integrate the public sector government expenditures and taxesinto the aggregateexpenditures model.
Test Bank: II Topic: Adding the Public Sector
A recessionary expenditure gap is the amount by which aggregateexpenditures must increase in order to reach the full-employment level of GDP.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
In the Great Recession of 2007–2009, the sector oftheeconomy that decreased the most was G.
FA LSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
In the Great Recession of 2007–2009, consumption, C, and investment, Ig, fell, while government, G, expanded.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
In the Great Recession of 2007–2009, the Federalgovernment enacteda "stimulus package" that was intended to bring inflation down.
FA LSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
When the Federal government provides tax rebate checks to taxpayers, as it did in 2008, the intent is to push the aggregate expenditures schedule in the economy upward.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 11-08 Differentiate betweenequilibrium GDP and full-employment GDP and identify and describe the nature and causes of recessionary expenditure gaps and inflationary expenditure gaps.
Test Bank: II Topic: Equilibrium versus Full-Employment GDP
Chapter 12 AggregateDemand and AggregateSupply Answer Key
Multiple Choice Questions
The aggregate demandcurve
is upsloping because a higher price level is necessary to make production profitable as production costs rise.
is downsloping because production costs decline as real output increases.
shows the amount of expenditures required to induce the production of each possible level of real output.
D. shows the amount of real output that will be purchased at each possible price level.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The aggregate demand curve is
vertical under conditions of full employment.
horizontal when there is considerable unemployment in the economy.
C. downsloping because of the interest-rate, real-balances, and foreignpurchases effects.
D. downsloping because production costs decrease as real output rises.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The interest-rate effect suggests that
a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.
an increasein the price levelwill increase the demand for money, reduce interest rates,and decrease consumption and investment spending.
C. an increase in the price level will increasethe demand for money, increaseinterest rates, and decrease consumption and investment spending.
D. an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The real-balances effect indicatesthat
an increasein the price levelwill increase the demand for money, increase interest rates,and reduce consumption and investment spending.
a lower price level will decrease the real value of many financial assets and therefore reduce spending.
a higher price level will increasethe real value of many financialassets and therefore increase spending.
D. a higher price level will decreasethe real value of many financial assets and therefore reduce spending.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The foreign purchases effect suggests that an increase in the U.S. price level relative to other countrieswill
A. increase the amount of U.S. real output purchased.
B. increase U.S. imports and decrease U.S. exports.
increase both U.S. imports and U.S. exports.
decrease both U.S. imports and U.S. exports.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will
shift the aggregate demand curve leftward.
shift the aggregate supply curve leftward.
decrease U.S. exports and increase U.S. imports.
D. increase U.S. exports and decreaseU.S. imports.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The foreign purchases effect
shifts the aggregate demand curve rightward.
shifts the aggregate demand curve leftward.
shifts the aggregate supply curve rightward.
D. moves the economy along a fixed aggregate demand curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
If the price level increasesin the United States relative to foreign countries, then Americanconsumers will purchase more foreign goods and fewer U.S. goods. This statement describes
A. the output effect.
B. the foreign purchases effect.
the real-balances effect.
the shift-of-spending effect.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The real-balances, interest-rate, and foreign purchases effects all help explain
A. why the aggregate demand curve is downsloping.
why the aggregate supply curve is upsloping.
shifts in the aggregate demand curve.
shifts in the aggregate supply curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
Which of the followingis incorrect?
As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise.
As the price level falls, the demand for money declines, the interestrate declines, and interest-rate-sensitive spending increases.
C. When the price level increases, real balances increase and businesses and households find themselves wealthier and therefore increasetheir spending.
D. Given aggregatedemand, an increase in aggregate supply increasesreal output and, assuming downward-flexible prices, reduces the price level.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-01 Define aggregate demand AD and explain how its downward slope is theresult of the real-balances effect, the interest-rate effect, andthe foreign purchases effect.
Test Bank: I Topic: Aggregate Demand
The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the
real-balances, interest-rate, and foreign purchases effects.
determinants of aggregatesupply.
C. determinants of aggregatedemand.
D. sole determinants of the equilibrium price level and the equilibrium real output.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
The determinants of aggregatedemand
A. explain why the aggregate demand curve is downsloping.
B. explain shifts in the aggregate demand curve.
demonstrate why real output and the price level are inversely related.
include input prices and resource productivity.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Other things equal, if the national incomes of the major trading partners of the United Stateswere to rise, the U.S.
A. aggregate demand curve would shift to the right.
aggregate supply curve would shift to the left.
aggregate supply curve would shift to the right.
aggregate demand curve would shift to the left.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Which one of the following would not shift the aggregate demand curve?
A. a change in the price level
depreciation of the international value of the dollar
a decline in the interest rate at each possible price level
an increasein personal income tax rates
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Other things equal, a decrease in the real interestrate will
A. expand investment and shift the AD curve to the left.
B. expand investment and shift the AD curve to the right.
reduce investment and shift the AD curve to the left.
reduce investment and shift the AD curve to the right.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
A decline in investment willshift the AD curve to the
A. left by a multiple of the change in investment.
left by the same amount as the change in investment.
right by the same amount as the changein investment.
right by a multipleof the change in investment.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
An increase in net exportswill shift the AD curve to the
left by a multiple of the changein net exports.
left by the same amount as the change in net exports.
right by the same amount as the change in net exports.
D. right by a multipleof the change in net exports.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift
leftward by $50 billionat each price level.
rightward by $10 billion at each price level.
C. rightward by $50 billion at each price level.
D. leftward by $40 billionat each price level.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
If investment decreases by $20 billion and the economy's MPC is 0.5, the aggregate demand curve willshift
A. leftward by $40 billionat each price level.
rightward by $20 billion at each price level.
rightward by $40 billion at each price level.
leftward by $20 billionat each price level.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
An economy's aggregate demand curve shifts leftward or rightwardby more than changesin initial spendingbecause of the
net export effect.
wealth effect.
real-balances effect.
D. multiplier effect.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Which of the followingwould most likely shift the aggregate demand curve to the right?
A. an increase in stock prices that increases consumerwealth
increased fear that a recession will cause workers to lose their jobs
an increasein personal income tax rates
a reduction in household borrowing because of tighter lending practices
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Which of the followingwould most likelyreduce aggregate demand (shiftthe AD curve to the left)?
a reduced amount of excess capacity
increased government spending on militaryequipment
C. an appreciation of the U.S. dollar
D. increased consumer optimismregarding future economic conditions
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, howmuchwill the change in investment increase aggregatedemand?
$12 billion
$20 billion
$33.3 billion
D. $50 billion
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
In an effort to avoidrecession, the government implementsa tax rebate program,effectively cutting taxes for households. We would expect this to
A. affect neither aggregate supply noraggregate demand.
B. increase aggregate demand.
reduce aggregate demand.
reduce aggregate supply.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 12-02 Explain the factors that causechanges shifts in AD.
Test Bank: I Topic: Changes in Aggregate Demand
The immediate-short-run aggregate supply curve represents circumstances where
A. both input and output prices are fixed.
both input and output prices are flexible.
input prices are fixed, but output prices are flexible.
input prices are flexible, but output prices are fixed.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-03 Define aggregate supply AS and explain how it differsin the immediate short run, theshort run, and the longrun.
Test Bank: I Topic: Aggregate Supply
The immediate-short-run aggregate supply curve is
downsloping.
upsloping.
vertical.
D. horizontal.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-03 Define aggregate supply AS and explain how it differsin the immediate short run, theshort run, and the longrun.
Test Bank: I Topic: Aggregate Supply
27.
In the diagram, the economy's immediate-short-run aggregate supply curve is shown by line
1.
2.
C. 3.
D. 4.
AACSB: Knowledge Application
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-03 Define aggregate supply AS and explain how it differsin the immediate short run, theshort run, and the longrun.
Test Bank: I Topic: Aggregate Supply
Type: Graph
28.
In the diagram, the economy's relevant aggregate demand and immediate-short-run aggregate supply curves, respectively, are lines
A. 4 and 3.
4 and 1.
2 and 4.
2 and 3.
AACSB: Knowledge Application
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 12-03 Define aggregate supply AS and explain how it differsin the immediate short run, theshort run, and the longrun.
Test Bank: I Topic: Aggregate Supply
Type: Graph
29.