AP Economics Aggregate Demand and Aggregate Supply Review

Question 1

Which of the following formulas is the Consumption Function?

Accepted Answer

C = a + bY

Question 2

All of the following would increase the consumption curve except

Accepted Answer

expectations that inflation will decrease in the future

Question 3

Suppose MPC=0.9 and you spend $1000. How much will GDP actually increase?

Accepted Answer

$10,000

Question 4

Which of these events would shift AD to the left?

Accepted Answer

an increase in interest rates cuts investment expenditures

Question 5

All of the following are considered to be automatic stabilizers except

Accepted Answer

changes to minimum wage laws

Question 6

Whose hypothesis states that our MPC tends to change during different stages of life?

Accepted Answer

Franco Modigliani

Question 7

If people save money and businesses do not borrow it, which of the following may occur?

Accepted Answer

paradox of thrift

Question 8

Which of these events would shift SRAS to the left?

Accepted Answer

Hurricane Katrina devastates the Gulf Coast

Question 9

Which of these could cause an increase in both the price level and the unemployment rate?

Accepted Answer

cost-push inflation

Question 10

MPC=0.8 and nominal GDP=$500 million, full employment real GDP=$480 million. Fill the gap.

Accepted Answer

decrease G by $4 million

Question 11

The problem of considerable inflation and unemployment occurring at the same time is called

Accepted Answer

stagflation

Question 12

All of the following will decrease the investment curve except

Accepted Answer

increase in technology level

Question 13

If an increase in AD increases real GDP but not the price level, which SRAS segment are we on?

Accepted Answer

horizontal

Question 14

The tendency for inflation to change relatively slowly from year to year is called

Accepted Answer

inflation inertia

Question 15

Whose hypothesis states that poor people consumer a higher % of income than the rich?

Accepted Answer

John Maynard Keynes

Question 16

Which of these formulas is the Income Multiplier?

Accepted Answer

1 / (1-MPC)

Question 17

Which of these events would shift SRAS to the right?

Accepted Answer

decrease in the cost of labor

Question 18

Which of these events would shift AD to the right?

Accepted Answer

decrease in corporate taxes leads to increased investment

Question 19

When Y increases by $1 million and C increases by $750,000, what must MPC be?

Accepted Answer

0.75

Question 20

Suppose MPC=0.5 and you earn $100. How much of the $100 will you save?

Accepted Answer

$50

Question 21

Demand-pull inflation occurs when there is a(n)

Accepted Answer

increase in AD

Question 22

Cost-push inflation occurs when there is a(n)

Accepted Answer

decrease in SRAS

Question 23

What does LRAS look like on a graph?

Accepted Answer

vertical line

AP Economics Aggregate Demand and Aggregate Supply Review

Questions 23

AP Economics Aggregate Demand and Aggregate Supply Review

Questions 23