The demand schedule for a good:
a. indicates the quantity that people will buy at the prevailing price.
b. indicates the quantities that suppliers will sell at various market prices.
c. indicates the quantities that will be purchased at alternative market prices.
d. is determined primarily by the cost of producing the good.
Question 2Faster growth rates by a major trading partner, combined with an increase in stock market wealth, would have what effect on aggregate demand?
a. AD would increase.
b. AD would decrease.
c. AD would stay the same.
d. AD could either increase or decrease, depending on which change was of a greater magnitude.
Question 3Assume that a GDP gap can be closed by a 200 initial change in planned spending. The MPS is 0.3 and the MPI equals 0.1 . If the economy is currently in equilibrium with an income level of 600, potential GDP equals:
a. 1,600.
b. 1,100.
c. 800.
d. 600.
e. 400.
Question 4When quantity demanded increases at every possible price, the demand curve
a. shifts to the left.
b. shifts to the right.
c. there is a movement along the given demand curve.
d. none of the above.
Question 5An increase in business tax rates, combined with a decrease in consumer confidence, would have what effect on aggregate demand?
a. AD would increase.
b. AD would decrease.
c. AD would stay the same.
d. AD could either increase or decrease, depending on which change was of a greater magnitude.
Question 6If the spending multiplier equals 5 and equilibrium income is 2 billion below potential GDP, then _____ to reach the potential real GDP level.
a. total spending needs to increase by 0.1 billion
b. nominal GDP needs to increase by 1.2 billion
c. total spending needs to decrease by 6 billion
d. nominal GDP needs to decrease by 12 billion
e. total spending needs to increase by 0.4 billion
Question 7When quantity demanded decreases at every possible price, the demand curve
a. shifts to the left.
b. shifts to the right.
c. there is a movement along the given demand curve.
d. none of the above.
Question 8An increase in investment, combined with an increase in imports, would have what effect on aggregate demand?
a. AD would increase.
b. AD would decrease.
c. AD would stay the same.
d. AD could either increase or decrease, depending on which change was of a greater magnitude.
Question 9Consider a closed economy described by AE (aggregate expenditures) = 800,000 + 0.75Y Assume that this economy is initially in equilibrium. But now the government implements a program to improve highways that will cost 1 million. This implies that equilibrium real GDP will:
a. decrease by 1 million.
b. decrease by 4 million.
c. increase by 1 million.
d. increase by 4 million.
e. decrease by 800,000.
Question 10Which of the following is true of a demand curve?
a. It must remain stable over time.
b. It can shift either rightward or leftward.
c. It is possible to move along the curve, but the demand curve will not shift.
d. None of the above are true.
Question 11Which of the following does not increase U.S. aggregate demand?
a. an increase in real wealth
b. lower interest rates
c. an increase in imports
d. a decrease in the exchange rate value of the dollar
Question 12Suppose equilibrium income in an economy decreases by 600 as a result of a change in government spending. If the multiplier is 3, what is the change in government spending?
a. Government spending will decrease by 1,800.
b. Government spending will decrease by 600.
c. Government spending will decrease by 200.
d. Government spending will increase by 400.
e. Government spending will increase by 1,200.
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