The multiplier will be greater on aggregate demand if:

there is no increase in the price level

When AD decreases, many businesses may choose to reduce employment over reducing wages because

of restrictions over minimum wage laws

The multiplier effect refers to:

changes in aggregate spending create bigger change in GDP

An increase in investment spending will:

see a larger increase in income due to multiplier effect

Imagine the investment increases by $10 billion and the MPC is 0.8. The AD curve will shift:

rightward by $50 billion at each price level

Which of the following illustrates a positive supply shock?

discovery of new supplies of a natural resource

The aggregate demand curve is downward sloping because:

the real-balances and the interest rate effect

studbud

AP Macro - Ch 27 Aggregate Supply and Aggregate Demand

15 termsStudBud Administration531 plays

AP Macro - Aggregate Demand and Aggregate Supply

Flashcards15 cardsFPractice quizPHost liveL

Questions 15

Answers

1
Which of the following describes the aggregate supply curve in the long run?
always vertical
horizontal
upward sloping
horizontal at first, then upward sloping
2
An event that shifts the short-run aggregate supply curve (ex., change in commodity prices) is
supply shock
recessionary gap
stagflation
demand shock
3
The multiplier will be greater on aggregate demand if:
AD increases and AS decreases
both AD and AS increase
both AD and AS decrease
there is no increase in the price level
4
When aggregate output is above potential output, we call this:
a recessionary gap
the wealth effect
self-correcting
an inflationary gap
5
Ceteris paribus, a shift of the AS curve to the left involves all of the following EXCEPT:
a decrease in the labor force
an increase in government regulation
a decrease in productivity
a decrease in workers' wages
6
When AD decreases, many businesses may choose to reduce employment over reducing wages because
it may reduce demand for their product
of restrictions over minimum wage laws
it increases the cost of production
it may create inflation
7
The multiplier effect refers to:
changes in aggregate spending create bigger change in GDP
government regulations that affect the GDP
the MPS will always be greater than 1
any change in aggregate spending always decreases GDP
8
An increase in investment spending will:
see a larger increase in income due to multiplier effect
more of an increase in come due to net exports effect
less income due to the multiplier effect
less of an increase income due to net exports effect
9
All of the following will cause the aggregate demand curve to shift EXCEPT:
decrease in government spending
change in consumer income
change in price level
an increase in net exports
10
Imagine the investment increases by $10 billion and the MPC is 0.8. The AD curve will shift:
rightward by $5 billion at each price level
rightward by $80 billion at each price level
rightward by $50 billion at each price level
leftward by $30 billion at each price level
11
Which of the following illustrates a positive supply shock?
a decrease in a natural resource
a decrease in the price of labor
a decrease in the labor force over a three-year period
discovery of new supplies of a natural resource
12
Which of the following factors will shift the aggregate supply curve to the right?
an increase in productivity
increased wages for workers
an increase in government regulations
consumer income increases
13
If the MPC is 0.6 and spending increases by $10 billion, then income will:
increase by $25 billion
increase by $60 billion
decrease by $60 billion
increase by $2.5 billion
14
The aggregate demand curve is downward sloping because:
the crowding out effect
the real-balances effect
the substitute effect
the real-balances and the interest rate effect
15
The increase in consumer spending when disposable income rises by $1 is known as:
marginal propensity to save
interest rate effect
aggregate demand curve
marginal propensity to consume

AP Macro - Ch 27 Aggregate Supply and Aggregate Demand Flashcards | StudBud