1. The smaller the mpe, the more repercussions there are from a change in expend
ID: 1226127 • Letter: 1
Question
1. The smaller the mpe, the more repercussions there are from a change in expenditures or production and hence the greater is the multiplier. True False
2. A decrease in real money balances resulting from a higher price level will: A. reduce both interest rates and investment. B. reduce interest rates and increase investment. C. increase both interest rates and investment. D. increase interest rates and reduce investment.
3. What is the dominant mechanism in the Multiplier Model? A. The Interest Rate Adjustment Mechanism. B. The Price Level Adjustment Mechanism. C. The Income Adjustment Mechanism. D. The Deficit Adjustment Mechanism.
4. Laissez-faire economists generally oppose government intervention in the market process. True False
5. According to Say's Law: A. demand and supply in the economy can never be in disequilibrium. B. demand and supply in the economy can never be in equilibrium. C. people do not save. D. prices never rise in a market economy.
6. In the AS/AD Model, as the price level rises, the holders of money become richer and buy more. This is one reason why the aggregate demand curve is downward sloping. True False
7. In the 1990's, the price level in the U.S. rose relative to the price level in Japan. Other things held equal, one would expect: A. U.S. exports to Japan would rise and U.S. imports from Japan would decline. B. U.S. exports to Japan would decline and U.S. imports from Japan would rise. C. both U.S. exports to Japan and U.S. imports from Japan would rise. D. both U.S. exports to Japan and U.S. imports from Japan would fall.
8. A Keynesian economist would be most likely to agree with which of the following statements? A. Government policies do not affect economic activity B. Government can implement policy proposals that can positively impact the economy. C. Most government policies would probably make things worse. D. The economy ought to be left to market forces.
9. Suppose that AE = $7,000 + 0.8Y. Using this information, what will equilibrium income be in the economy? A. $7,000 B. $8,750 C. $35,000 D. $52,000
10. In the Multiplier Model, aggregate production creates: A. an equal amount of expenditures, but not necessarily an equal amount of income. B. an equal amount of savings, but not necessarily an equal amount of expenditures. C. an equal amount of expenditures, but not necessarily an equal amount of savings. D. an equal amount of income, but not necessarily an equal amount of expenditures.
11. In the short run according to Keynes, a(n) ______________ in saving could _________________ aggregate demand by ____________________ investment. A. decrease; raise; increasing B. decrease; reduce; decreasing C. increase; raise; increasing D. increase; reduce; decreasing
12. If the mpe is 0.75, then the multiplier is equal to 4. True False
13. Keynes argued that: A. the distinction between the short run and the long run is irrelevant. B. the long run is more relevant than the short run. C. the short run is more relevant than the long run. D. neither the short run or the long run matter, and that people should take up surfing instead.
14. All of the following statements about the AS/AD Model are true except: A. on the horizontal axis is the aggregate output level. B. on the vertical axis is the price of a certain good, like dishwashers for example. C. the model does not depend on the concept of opportunity cost and substitution. D. it can incorporate both Keynesian and Classical views on the economy.
15. Suppose AE = $12,000 + 0.8Y. Equilibrium income in the economy will be: A. $12,000 B. $15,000 C. $42,000 D. $60,000
16. __________________ are expenditures that change as income changes. A. Autonomous expenditures B. Floating expenditures C. Induced expenditures D. Variable expenditures
17. A lower U.S. price level will likely cause U.S. exports to _______________ and U.S. imports to ________________. A. increase; increase as well B. increase; decrease C. decrease; increase D. decrease; decrease as well
18. A decrease in the price level might cause: A. an increase in the quantity of aggregate demand because of the substitution effect. B. an increase in the quantity of aggregate demand because of the wealth effect. C. a decrease in the quantity of aggregate demand because of the interest rate effect. D. a decrease in the quantity of aggregate demand because of the multiplier effect.
19. A(n) ______________________ in foreign income will most likely cause a(n) ___________________ in U.S. exports so the U.S. aggregate demand curve shifts to the _______________. A. decrease; decrease; left B. decrease; increase; right C. increase; increase; left D. increase; decrease; right
20. Suppose prices in the U.S. are expected to increase sharply in the near future. This is likely to: A. shift the AD Curve to the left. B. shift the AD Curve to the right. C. make the AD Curve flatter. D. make the AD Curve steeper.
Explanation / Answer
Answer ) 1.) TRUE.
2.) D. increase interest rates and reduce investment.
A decrease in real balances increase the interest rate, making it costlier for businesses to borrow.
The higher cost of borrowing leads to lower levels of business investment.
3,) C. The Income Adjustment Mechanism.
4.) TRUE
Laissez-faire economists believe that government intervention in the economy will make things worse and oppose government intervention for this reason.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.