The SAS Curve is most likely to shift down if: If aggregate expenditures increas

Question

The SAS Curve is most likely to shift down if:

If aggregate expenditures increased by $150 when income increased by $200, we could conclude that the mpe is equal to 0.25.

True
False

Suppose autonomous expenditures equal $1,500 and the mpe is 0.9. Now suppose the mpe falls to 0.8. Using the Multiplier Equation, we know that equilibrium income will:

The LAS Curve plays an important role in determining:

If ____________________ exceeds ____________________, eventually input prices will fall and output will rise.

A. productivity rises, but wages fall. B. productivity rises, but not as fast as wages. C. productivity falls, but wages rise. D. wages fall, but not as fast as productivity.

Explanation / Answer

1. A. productivity rises, but wages fall.

2. True

income = aggregate expenditure / (1-mpe)

200 = 150/(1-mpe)

(1-mpe) = 150/200

1 - mpe = 0.75

mpe = 0.25

3. D. decrease by $7,500.

Income = 1500/(1-0.9) = 15000

New Income = 1500/(1-0.8) = 7500

So, equilibrium income decreases by $ 7500.

4. D. aggregate output in the long run.

5. C. potential output; aggregate demand

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.