AP Econ Friday Quiz 4Q4W

The multiplier is useful in determining:

• the full employment rate
• level of business inventories
• rate of inflation
• change in GDP resulting from a change in spending

If the MPC is .7 and government spending increases by $3 billion, GDP will

• increase by $10 billion

• increase by 2.1 billion

• decrease by $4.29 billion

• increase by $4.29 billion

Assume MPC is 2/3. If government spending increases by $2 billion, GDP will increase by

• $3 billion

• $2/3 billion

• $6 billion

• $2 billion

If there is an initial increase in government spending into the economy, then the final increase in aggregate demand and real GDP will be greater. This reflects

• economic growth

• the multiplier effect

• keynesian economic policy

• the accelerator effect

The proportion of any change in income that is spent rather than saved is

• the multiplier

• income determinants

• marginal propensity to consume

• macroeconomic equilibrium

The equation for the multiplier is:

• 1/MPC
• 1/1+MPC
• 1/MPS
• 1/1-MPS

Aggregate expenditure is defined as the

• total income of an economy.
• spending on all goods and services in Australia.
• sum of consumer, investment and government spending, and net exports
• sum of consumer, planned investment and government spending, and net exports.

The largest component of aggregate expenditure is

• net exports.
• consumption.
• planned investment.
• government spending.

What does the vertical axis represent on the aggregate demand curve?

• Total Input

• Total Output

• Price Level

• Disposable Income

The intersection of the aggregate demand and aggregate supply curve occurs at the economy’s equilibrium level of

• Nominal investment and the interest rate       
• Government taxes and employment
• Real disposable income and unemployment     
• Real domestic output and the price level