29) Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P0 . Now, suppose there is an exogenous rise in the price level to P1 . Which of the following statements describes the likely macroeconomic effects?

A) The AE curve shifts to , a new equilibrium is established at point U, and the AD curve shifts from to , and equilibrium from point B to point D.

B) The AE curve shifts to , a new equilibrium is established at point W, and the economy moves from point B to point C along .

C) The AE curve shifts to , a new equilibrium is established at point U, and the economy moves from point B to point A along

D) The AE curve shifts to , a new equilibrium is established at point W, and the AD curve shifts from to , and equilibrium moves from point B to point D. 30) Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is . Now, suppose there is an increase in desired investment and no change in the price level. Which of the following statements describes the likely macroeconomic effects?

A) The AE curve shifts up to , the AD curve shifts to , and a new equilibrium is established at point C, with real GDP at .

B) The AE curve shifts down to , the AD curve shifts to , and a new equilibrium is established at point F, with real GDP at .

C) The AE curve shifts to , the AD curve shifts to , and a new equilibrium is established at point E, with real GDP at .

D) The AE curve shifts to , the AD curve shifts to , and a new equilibrium is established at point F, with real GDP at .

E) The AE curve shifts to , the AD curve shifts to , and a new equilibrium is established at point E, with real GDP at . 22) If the economy is experiencing an inflationary output gap, the adjustment process operates as follows:

A) wages do not adjust, but the AD curve shifts to the right.

B) wages fall, unit costs fall, and the AD curve shifts rightward.

C) wages rise, unit costs rise, and the AS curve shifts leftward.

D) wages rise, unit costs rise, and the AS curve shifts rightward.

E) wages fall, unit costs fall, and the AS curve shifts rightward. 119) Consider a simple macro model with demand-determined output. Which of the following parameters will produce the strongest automatic stabilizer?

A) MPC = 0.8, t = 0.2, m = 0.3

B) MPC = 0.7, t = 0.3, m = 0.2

C) MPC = 0.7, t = 0.1, m = 0.4

D) MPC = 0.9, t = 0.2, m = 0.4

E) MPC = 0.8, t = 0.1, m = 0.2 120) Consider a simple macro model with demand-determined output. Which of the following parameters will produce the largest fluctuations in real GDP from autonomous expenditure shocks?

A) MPC = 0.8, t = 0.2, m = 0.3

B) MPC = 0.7, t = 0.3, m = 0.2

C) MPC = 0.7, t = 0.1, m = 0.4

D) MPC = 0.9, t = 0.2, m = 0.4

E) MPC = 0.8, t = 0.1, m = 0.2 2nd EditionDavid Anderson, Margaret Ray1,044 explanations

8th EditionN. Gregory Mankiw814 explanations

3rd EditionPaul Krugman, Robin Wells312 explanations

David Anderson, Margaret Ray1,002 explanations