Unit 3 Macro Review

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

• Increase in output

• Increase in price level

• Decrease in Aggregate Supply

• Decrease in Aggregate Demand

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

• Consumer optimism

• Populaiton

• Cost of Factors of Production

• Income taxes

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

• A high savings rate

• A high marginal tax rate

• An equilibrium level of income near full employment

• A low marginal propensity to save

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

• A decrease in the price level

• A decrease in unemployment

• An increase in real wages

• A decrease in short-run aggregate supply

• A decrease in full employment output

• An increase in real output due to an increase in the price level

• An increase in real output due to technological change

• An increase in unemployment

Which of the following will remain unchanged when the price level decreases?

• Long-run aggregate supply

• Inflationary expectations

• Nominal output

• Nominal wages

Given the graph of the short-run aggregate supply and long-run aggregate supply curves above, which of the following is true?

• At point Z, the economy is in long run equilibrium

• At point Y, the natural rate of unemployment is zero.

• At point X, there is no frictional unemployment.

• At point Z, the economy is experiencing an inflationary gap

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

• real investment and the interest rate

• real national output and the price level

• government expenditures and taxes

• imports and exports

Which of the following is a possible limitation of fiscal policy?

• It affects only interest-sensitive spending.

• Its outcome could be delayed because of implementation lags.

• It does not affect discouraged workers.

• It is less effective in reducing the natural rate of unemployment than monetary policy.

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

• Tax revenues increase, and transfer payments increase.

• Tax revenues decrease, and transfer payments decrease.

• Tax revenues decrease, and transfer payments increase.

• Tax revenues do not change, and transfer payments decrease.