If the national incomes of our trading partners increase, then our aggregate demand

increases because net exports increase.

Which of the following events would most likely reduce aggregate demand?

An increase in real interest rates

The MPC can be defined as the

change in consumption divided by the change in income

Which combination of factors would most likely increase aggregate demand?

An increase in wealth and a decrease in interest rates

The expenditure multiplier concept of the aggregate-expenditures model

magnifies the shifts of the aggregate demand curve.

If the MPC is 0,75 government could shift the aggregate demand curve leftward by $60 billion by

increasing taxes by $20 billion

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MacroEcon 2

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Macro Economics Review 2

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Questions 10

Answers

1
The short-run aggregate supply curve is most likely to shift to the right if
wages increase
productivity decreases
input prices decrease
sales taxes increase
2
If the national incomes of our trading partners increase, then our aggregate demand
decreases because consumption decreases.
increases because consumption increases.
decreases because net exports decrease.
increases because net exports increase.
3
The relationship between the MPS and the MPC is such that
MPC − 1 = MPS
MPS/MPC = 1
1 − MPC = MPS
MPC - MPS = 1
4
Which of the following events would most likely reduce aggregate demand?
A reduction in business and personal tax rates.
A reduction in the amount of existing capital stock.
An increase in expected returns on investment.
An increase in real interest rates
5
Changes in which of the following would not shift the aggregate demand curve?
income tax rates
foreign-exchange rates
real interest rates
productivity rates
6
The MPC can be defined as the
ratio of income to saving.
change in consumption divided by the change in income
ratio of saving to consumption.
change in income divided by the change in consumption.
7
Which combination of factors would most likely increase aggregate demand?
An increase in exports and a decrease in government spending
An increase in household debt and a decrease in net exports.
An increase in business taxes and a decrease in profits
An increase in wealth and a decrease in interest rates
8
A decrease in government spending will cause a(n)
increase in aggregate demand.
decrease in aggregate demand.
decrease in the quantity of real output demanded.
increase in the quantity of real output demanded.
9
The expenditure multiplier concept of the aggregate-expenditures model
magnifies the shifts of the aggregate demand curve.
is not at all relevant in the AD-AS model.
reverses the shift of the aggregate demand curve.
explains movement up or down the aggregate demand curve.
10
If the MPC is 0,75 government could shift the aggregate demand curve leftward by $60 billion by
reducing government purchases by $12 billion
increasing taxes by $20 billion
increasing taxes by $15 billion
reducing government purchases by $60 billion

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