1) Which of the following will most likely result from a decrease in government spending?

A decrease in aggregate demand.

If the government wants to increase spending by $100B without increasing inflation in the short run, it must do what?

Raise taxes by more than $100B.

An increase in the purchases of newly constructed houses will result in which of the following?

Aggregate demand will increase from residential investment spending.

Recessions can be caused by:

A decrease in aggregate demand.

Recessions will be less severe if tax revenue and transfer payments automatically change in which of the following ways?

Tax revenues decrease, and transfer payments increase.

Given the graph of the SRAS and LRAS curves below, which of the following is true?

At point X, the economy is experiencing a recessionary gap.

An increase in the price of oil (important input to production) will result in which of the following in the short run?

A decrease in the short-run aggregate supply.

The government cuts income taxes, how will consumption spending, real output, and unemployment change in the short run?

Spending will increase, output will increase, unemployment will decrease.

Based on the diagram below, which of the following describes the short-run equilibrium?

The economis is operating above full employment.

How does the long-run aggregate supply curve correspond to the production possibilities curve?

Both curves demonstrate maximum sustainable capacity.

In the AD-AS model, which of the following is true?

Recessionary gap: short-run equilibrium output is below the long-run output

Which of the following statements best describes the concept of an automatic stabilizer.

Nondiscretionary fiscal policy for mitigating the business cycle through AD

What self-adjustment is most likely to occur when short-run equilibrium output is below full employment output?

Nominal wages will fall, shifting the SRAS curve to the right.

In an adverse (negative) SRAS shock and the government pursues no policy. What will happen in the long run?

Nominal wages will fall with no change in the natural rate of unemployment.

The economy is at point A. The government does nothing and wages are flexible, what will occur in the long-run?

Wages fall, shift aggregate supply to the right, producing full employment.

studbud

AP Macro Unit 3 Review

25 termsStudBud Administration356 plays

Imported from external platform

Flashcards25 cardsFPractice quizPHost liveL

Questions 25

Answers

1
1) Which of the following will most likely result from a decrease in government spending?
An increase in output.
An increase in the price level.
A decrease in aggregate supply.
A decrease in aggregate demand.
2
If there is an inflationary gap, which of the following changes will move the economy back toward full employment?
An increase in government spending.
An increase in investment spending.
An increase in taxes.
An increase in transfer payments.
3
An increase in the price of an input will cause the aggregate demand curve and the short-run aggregate supply curve to:
AD: shift leftt; SRAS: shift left
AD: shift right; SRAS: shift right
AD: shift left; SRAS: no change
AD: no change; SRAS shift left
4
If the government wants to increase spending by $100B without increasing inflation in the short run, it must do what?
Raise taxes by less than $100B.
Lower taxes by $100B.
Raise taxes by $100B.
Raise taxes by more than $100B.
5
An increase in the purchases of newly constructed houses will result in which of the following?
Aggregate demand will increase from residential investment spending.
Aggregate demand will not change, since consumer spending has not changed.
Aggregate demand will increase as a result of an increase in in exports.
Aggregate demand will decrease as a result of a decrease in the price level
6
Recessions can be caused by:
An increase in exports.
A decrease in wages.
A decrease in aggregate demand.
An increase in the prive level.
7
Recessions will be less severe if tax revenue and transfer payments automatically change in which of the following ways?
Tax revenues increase, and transfer payments increase.
Tax revenues increase, and transfer payments decrease.
Tax revenues decrease, and transfer payments decrease.
Tax revenues decrease, and transfer payments increase.
8
Given the graph of the SRAS and LRAS curves below, which of the following is true?
At point Y, the natural rate of unemployment is zero.
At point X, the economy is experiencing a recessionary gap.
At point X, there is no frictional unemployment.
At point Z we're in long-run equilibrium but not in short-run equilibrium.
9
The NRU is 6 percent. If this is true and the current rate of unemployment is 5.1 percent, where will real GDP sit at?
Greater than Y2
At Y1
Greater than Y1 and less than Y2
Less than Y1
10
Which of the following will remain unchanged when the price level decreases?
Inflationary expectations
Long-run aggregate supply
Aggregate quantity demanded
Nominal wages
11
An increase in the price of oil (important input to production) will result in which of the following in the short run?
A decrease in the short-run aggregate supply.
A decrease in unemployment.
A decrease in the price level.
An increase in real wages.
12
Which of the following must be true in the long run?
Production increases when prices increase.
Prices and wages are flexible.
The natural rate of unemployment is not affected by changes in production.
Full employment increase when the price level decreases.
13
An increase in which of the following would cause an increase in aggregate supply?
The wage rate
Price of imports
Consumer Spending
Labor productivity
14
The government cuts income taxes, how will consumption spending, real output, and unemployment change in the short run?
Spending will increase, output will decrease, unemployment will decrease.
Spending will increase, output will increase, unemployment will decrease.
All will increase.
Spending will dcrease, output will decrease, unemployment will increase.
15
Based on the diagram below, which of the following describes the short-run equilibrium?
The economy is operating at full employment.
The economy is opearting below full employment.
There will be downward pressure on the price level.
The economis is operating above full employment.
16
A decrease in the price level will produce a movement between which of the following two points on the diagram below?
From point W to point Z
From point X to point Y
From point Y to point Z
From point Z to point Y
17
The marginal propensity to consume is:
0.8
0.9
1.33
0.75
18
How does the long-run aggregate supply curve correspond to the production possibilities curve?
Both curves illustrate the tradeoff between inflation and unemployment.
Both curves illustrate flexible wages and prices.
Both curves illustrate short-run macroeconomic equilibrium.
Both curves demonstrate maximum sustainable capacity.
19
In the AD-AS model, which of the following is true?
Inflationary gap: short-run equilibrium output is at the long-run output.
Recessionary gap: short-run equilibrium output is at the long-run output.
Inflationary gap: short-run equilibrium output is below the long-run ouptut
Recessionary gap: short-run equilibrium output is below the long-run output
20
Which of the following statements best describes the concept of an automatic stabilizer.
Nondiscretionary fiscal policy for mitigating the business cycle through AD
Measure of the effect that a change in gov spending has.
Discretionary fiscal policy for gov spending based off of the output gap.
Description of how total income is always equal to total expenditures.
21
What self-adjustment is most likely to occur when short-run equilibrium output is below full employment output?
Nominal wages will fall, shifting the SRAS curve to the right.
Full-employment output will fall to equal the short-run equilibrium output.
Recessionary gap will create upward pressure on prices, shifting AD left.
Input prices will increase as firms compete for labor and capital.
22
A contractionary (negative) supply shock would most likely result in:
An increase in GDP.
An increase in aggregate demand.
A decrease in employment.
A decrease in the prive level.
23
What are the income tax multiplier and the spending multiplier?
TM: -2; SM: 10
TM: -9; SM: 10
TM: 0.2; SM: -0.8
TM: -0.1; SM: 0.9
24
In an adverse (negative) SRAS shock and the government pursues no policy. What will happen in the long run?
Deflation will worsen and nominal wages will rise.
Inflation will rise and nominal wages will fall.
Aggregate demand will increase to restore full employment.
Nominal wages will fall with no change in the natural rate of unemployment.
25
The economy is at point A. The government does nothing and wages are flexible, what will occur in the long-run?
Wages rise, shift aggregate supply to the right, producing full employment.
The economy will remain at point A.
Wages rise, shift AD curve to the right, producing full employment.
Wages fall, shift aggregate supply to the right, producing full employment.

AP Macro Unit 3 Review Flashcards | StudBud