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Macroeconomics Exam 2

Terms in this set (74)

When the government runs a budget deficit, we would expect to see that
A) private saving will fall.
B) investment will fall.
C) G + TR < T.
D) public saving is positive.
B
Consider the market for loanable funds. Holding everything else constant, if the federal government eliminates incentives to save, then as a result
A) the supply for loanable funds increases and the equilibrium real interest rate increases.
B) the supply for loanable funds decreases and the equilibrium real interest rate increases.
C) the supply for loanable funds increases and the equilibrium real interest rate decreases.
D) the demand for loanable funds decreases and the equilibrium real interest rate increases.
A
Consumption spending is $18 million, planned investment spending is $4 million, actual investment spending is $4 million, government purchases are $6 million, and net export spending is $1.5 million. Based on this information, which of the following is true?
A) Aggregate Expenditure is less than GDP.
B) Aggregate Expenditure is more than GDP.
C) Aggregate Expenditure is equal to GDP.
D) There are unplanned changes in inventories.
C
If the MPC is 0.8, a $600 increase in disposable income will lead to a ________ increase in consumption.
A) $480
B) $750
C) $3000
D) $1200
A
The slope of the aggregate expenditure line equals the slope of the ____________________
A) Public Savings
B) Budget Deficit
C) Wages
D) Consumption Function
D
If planned aggregate spending is less than total production
A) actual inventories will equal planned inventories.
B) GDP will increase.
C) the economy is in equilibrium.
D) firms will experience an unplanned increase in inventories.
D
Induced expenditure is a type of expenditure that depends on
A) Consumption
B) GDP
C) Savings
D)Prices
GDP
Higher interest rates increase both consumption and investment spending. Choose one: True OR False
False
The aggregate demand curve slopes downward for all of the following reasons except
A) A higher price level decreases the real wealth of households, thereby decreasing household consumption.
B) A higher price level makes U.S. exports relatively more expensive, thereby decreasing net exports.
C) A higher price level increases the rate of interest, which decreases household consumption.
D) A higher price level makes imports from other countries relatively more expensive, and U.S. citizens buy more imports.
D
All items below decrease short-run aggregate supply except
A) a decrease in the labor force.
B) an increase in the expected future price level.
C) positive technological change.
D) a decrease in capital.
C
If aggregate demand just increased, which of the following may have caused the increase?
A) an increase in government purchases.
B) an increase in the interest rate.
C) an increase in the price level.
D) and increase in imports.
A
Suppose the economy is in long-run equilibrium. Now suppose there is an unexpected increase in the price of oil. According to the AD-AS model, what happens to prices and output in the short run? (Hint: Do they increase, decrease, or remain the same?) Answer: Prices _______________ , Output ______________
A) Increase, decrease
B) Decrease, Decrease
C) Increase, Increase
D) Decrease, Increase
A
Suppose the economy is in long-run equilibrium. Now suppose that many firms expect the future profitability of their investment spending to be increasing. According to the AD-AS model, what happens to prices and output in the new short run equilibrium?
A) Prices will be higher, output will be higher.
B) Prices will be higher, output will be at its potential level.
C) Prices will be lower, output will be higher.
D) Prices will be lower, output will be lower.
A
There has been a decrease in investment. As a result, real GDP will ____________ in the short run, and _______________ in the long run.
A) increase; increase further.
B) increase; decrease to its initial level.
C) decrease; decrease further.
D) decrease; increase to its initial level.
D
At a short-run macroeconomic equilibrium, real GDP is always equal to potential GDP. Choose one: True OR False
False
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