Unit Four ReviewNational Income and Price Determination

Unit Four ReviewNational Income and Price Determination

AP MacroeconomicsAP MacroeconomicsMR. GrahamMR. Graham

Changes in which of the following leads to a shift of the aggregate consumption function?

I. expected future disposable incomeII. aggregate wealthIII. current disposable income

a. I onlyb. II onlyc. III onlyd. I and II onlye. I, II and III

The slope of a family’s consumption function is equal to

a. the real interest rateb. the inflation ratec. the marginal propensity to consumed. the rate of increase in household current

disposable incomee. the tax rate

Given the consumption function c = $16,000 + 0.5 yd, if individual household current disposable income is $20,000, individual household consumer spending will equal

a. $36,000b. $26,000c. $20,000d. $16,000e. $6,000

The level of planned investment spending is negatively related to the

a. rate of return on investmentb. level of consumer spendingc. level of actual investment spendingd. interest ratee. all of the above

Actual investment spending in any period is equal toa. planned investment spending +

unplanned inventory investment b. planned investment spending −

unplanned inventory investmentc. planned investment spending +

inventory decreasesd. unplanned inventory investment +

inventory increasese. unplanned inventory investment −

inventory increases

Which of the following explains the slope of the aggregate demand curve?

I. the wealth effect of a change in the aggregate price levelII. the interest rate effect of a change in the aggregate price levelIII. the product-substitution effect of a change in the aggregate price level

a. I onlyb. II onlyc. III onlyd. I and II onlye. I, II and III

Which of the following will shift the aggregate demand curve to the right?

a. a decrease in wealthb. pessimistic consumer expectationsc. a decrease in the existing stock of capitald. contractionary fiscal policye. a decrease in the quantity of money

The Consumer Confidence Index is used to measure which of the following?

a. the level of consumer spendingb. the rate of return on investmentsc. consumer expectationsd. planned investment spendinge. the level of current disposable income

Decreases in the stock market decrease aggregate demand by decreasing which of the following?

a. consumer wealthb. the price levelc. the stock of existing physical capitald. interest ratese. tax revenues

Which of the following government policies will shift the aggregate demand curve to the left?

a. a decrease in the quantity of moneyb. an increase in government purchases of goods

and servicesc. a decrease in taxesd. a decrease in interest ratese. an increase in government transfers

Which of the following will shift the short-run aggregate supply curve? A change in

a. profit per unit at any given price levelb. commodity pricesc. nominal wagesd. productivitye. all of the above

Because changes in the aggregate price level have no effect on aggregate output in the long run, the long-run aggregate supply curve isa. verticalb. horizontalc. fixedd. negatively slopede. positively sloped

The horizontal intercept of the long-run aggregate supply curve is

a. at the originb. negativec. at potential outputd. equal to the vertical intercepte. always the same as the horizontal intercept of

the short-run aggregate supply curve

A decrease in which of the following will cause the short-run aggregate supply curve to shift to the left?a. commodity pricesb. the cost of health care insurance premiums

paid by employersc. nominal wagesd. productivitye. the use of cost-of-living allowances in labor

contracts

That employers are reluctant to decrease nominal wages during economic downturns and raise nominal wages during economic expansions leads nominal wages to be described as

a. long-runb. unyieldingc. flexibled. reale. sticky

Which of the following causes a negative supply shock?

I. a technological advanceII. increasing productivityIII. an increase in oil prices

a. I onlyb. II onlyc. III onlyd. I and III onlye. I, II and III

Which of the following causes a positive demand shock?

a. an increase in wealthb. pessimistic consumer expectationsc. a decrease in government spendingd. an increase in taxese. an increase in the existing stock of capital

During stagflation, what happens to the aggregate price level and real GDP?

Aggregate price level Real GDPa. decreases increasesb. decreases decreasesc. increases increasesd. increases decreasese. stays the same stays the same

Which of the following statements is true if this economy is operating at P1 and Y1? I. The level of aggregate output equals potential output. II. It is in short-run macroeconomic equilibrium. III. It is in long-run macroeconomic equilibrium.a. I onlyb. II onlyc. III onlyd. II and III onlye. I and III only

The economy depicted in the graph is experiencing a(n)

a. contractionary gap.b. recessionary gap.c. inflationary gap.d. demand gap.e. supply gap.

Which of the following contributes to the lag in implementing fiscal policy? I. It takes time for Congress and the President to pass spending and tax changes. II. Current economic data take time to collect and analyze.III. It takes time to realize an output gap exists.

a. I onlyb. II onlyc. III onlyd. I and III onlye. I, II, and III

Which of the following is a government transfer program?

a. Social Securityb. Medicare/Medicaidc. unemployment insuranced. food stampse. all of the above

Which of the following is an example of expansionary fiscal policy?

a. increasing taxesb. increasing government spendingc. decreasing government transfersd. decreasing interest ratese. increasing the money supply

Which of the following is a fiscal policy that is appropriate to combat inflation?

a. decreasing taxesb. decreasing government spendingc. increasing government transfersd. increasing interest ratese. expansionary fiscal policy

An income tax rebate is an example of

a. an expansionary fiscal policy.b. a contractionary fiscal policy.c. an expansionary monetary policy.d. a contractionary monetary policy.e. none of the above.

The marginal propensity to consume I. has a negative relationship to the multiplier II. is equal to 1 III. Represents the proportion of a change in consumers’ disposable income that is spent

a. I onlyb. II onlyc. III onlyd. I and III onlye. I, II and III

Assume that taxes and interest rates remain unchanged when government spending increases, and that both savings and consumer spending increase when income increases. The ultimate effect on real GDP of a $100 million increase in government purchases of goods and services will bea. An increase of $100 million.b. An increase of more than $100 million.c. An increase of less than $100 million.d. An increase of either more than or less than $100

million, depending on the MPC.e. A decrease of $100 million .

The presence of taxes has what effect on the multiplier? Theya. increase it.b. decrease it.c. destabilize it.d. negate it.e. have no effect on it.

A lump-sum tax is

a. higher as income increases.b. lower as income increases.c. independent of income.d. the most common form of tax.e. a type of business tax.

Which of the following is NOT an automatic stabilizer?a. Income taxesb. unemployment insurancec. Medicaidd. food stampse. monetary policy