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Aggregate Demand / Aggregate Supply Flashcards | StudBud
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Aggregate Demand / Aggregate Supply
Aggregate Demand / Aggregate Supply
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Review Questions for Tomorrow's Test
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1
Which of the following is most likely to cause an increase in the LRAS?
An increase in interest rates
An increase in aggregate demand
An improvement in the education system
An increase in government spending
2
When income goes from $9,000 to $10,000, consumption goes from $6,000 to $6,800. The MPC is
.6
.8
.2
.68
3
According to the Keynesian theory the most important determinant of savings and consumptions is
Interest Rates
Price Level
Level of Employment
Disposable Income
4
Which of the following correctly describes the components of Aggregate Demand?
C + I + G - (X+M)
C + I + G + (X-M)
C + I + G + (X+M)
C + I + G - (X-M)
5
A decrease in energy prices will have which effect on the price level and output?
Decrease in Price Level / Increase in Output
Increase in Price Level / No Change in Output
Decrease in Price Level / No Change in Output
No change in Price Level / Increase in Output
6
“Too much money chasing too few goods” describes which of the following?
The wealth effect
Deflation
Demand-Pull Inflation
Cost-push inflation
7
Rising input prices will shift which curve, in which direction?
AD right
AD left
SRAS left
SRAS right
8
If a recessionary gap exists, what is the classical economist’s answer to this problem?
Move AD left with less spending or increased taxes
Decrease input prices will lead SRAS to shift left
Move AD right with more spending or tax cuts
Decreased input prices will lead SRAS to shift right
9
An increase in G spending of $100 leads to an increase in real GDP of $500. The MPC must be:
5
.2
.8
.5
10
In an economy with a horizontal aggregate supply curve, what will an increase in G result in?
Increased Output and Decreased Price level
Increased Output & Increased Price level
No change in output and Increased Price level
Increased Output and No Change in Price level
11
The term “sticky” when referring to prices and wages refers to the idea that
Input prices and wages will increase with AD
Input prices and wages are not related to AD
Input prices/wages will NOT change with AD in the long-run
Input prices/wages will NOT change with AD in the short run
12
If the economy is in an unemployment equilibrium, an increase in AD caused by a fiscal stimulus
Will most likely cause a rise in the price level
Will not effect the price level
Will lower nominal prices and therefore raise real prices
Must cause a fall in the price level
13
Which event will cause an increase in both the price level and real gross domestic product?
Increase in inflationary expectations
Increase in Exports
Increase in interest rates
Increase in income taxes
14
Which of the following is a basic premise for classical economists?
Saving is greater than investing
The economy may be at equilibrium below full employment
The economy is self-correcting to full employment
Inflation is not as bad as unemployment
15
Income is $1,000. Consumption is $700 and the MPC is .6. If income increases by $100...
Consumption=$420 & Savings=$280
Consumption=$600 & Savings=$200
Consumptio=$760 & Savings=$340
Consumption=$660 & Savings=$320
