2018 Questions Flashcards
Consider a simple macro model with demand-determined output. In such a model, the larger is the marginal propensity to spend, the
A) flatter is AE and the smaller is the multiplier.
B) flatter is AE and the larger is the multiplier.
C) steeper is AE and the smaller is the multiplier.
D) steeper is AE and the larger is the multiplier.
E) greater is investment as a percentage of GDP.
The steeper is AE and the larger is the multiplier.
When determining the AE function for an open economy with government, it is generally assumed that as real national income
A) increases, exports will decrease.
B) increases, net exports will decrease.
C) increases, imports will decrease.
D) decreases, net exports will decrease.
E) decreases, exports will decrease.
Increases, net exports will decrease.
A parallel downward shift in the net export (NX) function can be caused by
A) an increase in domestic national income.
B) a decrease in foreign national income.
C) a decrease in domestic prices.
D) an increase in the Canadian-dollar price of foreign currency.
E) a decrease in foreign prices.
A decrease in foreign national income.
Consider the following news headline: “China signs deal to buy more Canadian wheat.” Assuming that aggregate output is demand-determined, what effect will this have, all other things equal, on the AE function and on equilibrium national income?
A) The AE function will shift down parallel to itself and equilibrium national income will fall.
B) The AE function will rotate upward (become steeper) and equilibrium national income will rise.
C) The AE function will rotate downward (become flatter) and national income will fall.
D) The AE function will shift up parallel to itself and equilibrium national income will rise.
E) There will be no change in the AE function or in equilibrium national income.
The AE function will shift up parallel to itself and equilibrium national income will rise.
Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?
A) a decrease in the business confidence of firms
B) a reduction in government purchases
C) a decrease in the marginal propensity to consume
D) a decrease in the price level
E) an increase in the price level
An increase in the price level
The short-run aggregate supply curve (SRAS) tends to be relatively steep when GDP is above potential output because firms are operating above ________ and ________ are rising rapidly.
A) equilibrium output; unit costs
B) profit-maximizing output; total costs
C) capacity; unit costs
D) equilibrium output; total costs
E) equilibrium output; average costs
Capacity; unit costs
