Macroeconomics Quiz

A decrease in the price of inputs will result in which of the following in the short run?

• An increase in short-run aggregate supply and an increase in long-run aggregate supply

• An increase in short-run aggregate supply and a decrease in output

• An increase in short-run aggregate supply and a decrease in price level

• An increase in aggregate demand and an increase in price level

• A decrease in aggregate demand and a decrease in price level

Assume that current real GDP falls short of full-employment output by $400 billion and the MPC is 0.8. What is the minimum increase in government spending that could bring about full employment?

• $80 billion
• $40 billion

• $100 billion

• $320 billion

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

• 1. Nominal investment and the interest rate

• Government taxes and employment

• Real disposable income and unemployment

• Imports and net exports

• Real domestic output and the price level

Stagflation might be caused by

• increase in technology

• decrease in the price of raw materials

• increase in the price of raw materials

• decrease in the money supply

• increase in the money supply

A major advantage of automatic stabilizers in fiscal policy is that they

• reduce private debt

• they require a balanced budget

• keep unemployment at zero percent

• go into effect without passage of new legislation

Which of the following would cause a rightward shift of the aggregate supply curve?

• an increase in the costs of production

• a tax cut for consumers

• An across the board reduction of wages in the manufacturing sector

• Inflationary expectations

• The shutdown of plants and movement of production of goods abroad

An appropriate fiscal policy to combat a recession would be to increase which of the following?

• interest rates

• the money supply

• taxes

• government spending

• the sales of government bonds

An increase in which of the following would cause the aggregate demand curve to shift to the left?

• Income taxes
• consumer optimism

• population

• net exports

A high marginal propensity to consume implies which of the following?

• A small change in consumption when income changes

• A high savings rate

• A high marginal tax rate

• An equilibrium level of income near full employment

• A low marginal propensity to save

In a closed economy with only lump-sum taxation, if the marginal propensity to consume is equal to 0.75, a $70 billion increase in government spending could cause a maximum increase of:

• $52.5 billion

• $70 billion

• $122.5 billion

• $210 billion

• $280 billion