1. Starting from long-run equilibrium, a decrease in aggregatedemand: a. causes
ID: 1251256 • Letter: 1
Question
1. Starting from long-run equilibrium, a decrease in aggregatedemand:a. causes a recessionary gap.
b. results in a lower price level.
c. increases unemployment.
d. does all of the above.
e. does b. and c., but not a.
2. An increase in labor productivity, other things equal,would:
a. reduce the short run equilibrium price level.
b. reduce the short run equilibrium real output level.
c. shift the short run aggregate supply curve leftward.
d. do none of the above.
3. Other things equal, if incomes in countries that are majortrading partners declined, we would expect:
a. a recessionary impact on the U.S. economy.
b. an expansionary impact on the U.S. economy.
c. no significant impact on the U.S. economy.
d. an increase in their demand for U.S. dollars.
4. Which of the following may prolong the duration of arecessionary gap?
a. lowering of taxes and/or interest rates
b. revival of consumer and business confidence
c. downward wage and price inflexibility
d. self-correction
5. Vannah earned $250,000 in 1999 as a celebrity endorser andspokesperson. She spent 85 percent of her earnings. In 2000, with anew contract she earned $750,000 per year. Her consumptionincreased by $250,000. Which of the following statements is nottrue?
a. Her 1999 average propensity to consume is 0.85.
b. Her average propensity to consume falls between 1999 and2000.
c. Her marginal propensity to consume equals 0.85.
d. Her marginal propensity to consume equals 0.50.
e. Her average propensity to consume in 2000 is 0.67.
6. A given change in disposable income would have the greatesteffect on consumption with which of the
following marginal propensities to consume?
a. 0.2
b. 0.4
c. 0.6
d. 0.8
7. Which of the following changes in disposable income would leadto the greatest increase in consumption?
a. a $20,000 increase in disposable income, if MPC equals 0.5
b. a $12,000 increase in disposable income, if MPC equals 0.75
c. a $15,000 increase in disposable income, if MPC equals 0.6
d. a $30,000 increase in disposable income, if MPC equals 0.25
8. Which of the following changes in tax income would lead to thesmallest increase in consumption?
a. a $20,000 decrease in taxes, if MPC equals 0.5
b. a $12,000 decrease in taxes, if MPC equals 0.75
c. a $15,000 decrease in taxes, if MPC equals 0.6
d. a $30,000 decrease in taxes, if MPC equals 0.25
9. Marginal propensity to save is equal to the change in __________divided by the change in __________.
a. consumption spending; total income
b. saving; total income
c. saving; disposable income
d. consumption spending; disposable income
10. If the marginal propensity to consume is 0.60, the marginalpropensity to save will be:
a. greater than 0.60.
b. equal to 0.40.
c. equal to 0.60.
d. equal to 0.
Explanation / Answer
1. Starting from long-run equilibrium, a decrease in aggregatedemand:a. causes a recessionary gap.
b. results in a lower price level.
c. increases unemployment.
d. does all of the above.
e. does b. and c., but not a.
2. An increase in labor productivity, other things equal,would:
a. reduce the short run equilibrium price level.
b. reduce the short run equilibrium real output level.
c. shift the short run aggregate supply curve leftward.
d. do none of the above.
3. Other things equal, if incomes in countries that are majortrading partners declined, we would expect:
a. a recessionary impact on the U.S.economy.
b. an expansionary impact on the U.S.economy.
c. no significant impact on the U.S. economy.
d. an increase in their demand for U.S. dollars.
4. Which of the following may prolong the duration of arecessionary gap?
a. lowering of taxes and/or interest rates
b. revival of consumer and business confidence
c. downward wage and priceinflexibility
d. self-correction
5. Vannah earned $250,000 in 1999 as a celebrity endorser andspokesperson. She spent 85 percent of her earnings. In 2000, with anew contract she earned $750,000 per year. Her consumptionincreased by $250,000. Which of the following statements is nottrue?
a. Her 1999 average propensity to consume is 0.85.
b. Her average propensity to consume falls between 1999 and2000.
c. Her marginal propensity to consume equals0.85.
d. Her marginal propensity to consume equals0.50.
e. Her average propensity to consume in 2000 is 0.67.
6. A given change in disposable income would have the greatesteffect on consumption with which of the
following marginal propensities to consume?
a. 0.2
b. 0.4
c. 0.6
d. 0.8
7. Which of the following changes in disposable income would leadto the greatest increase in consumption?
a. a $20,000 increase in disposable income, if MPC equals0.5=$40,000
b. a $12,000 increase in disposable income,if MPC equals 0.75=$48000
c. a $15,000 increase in disposable income, if MPC equals0.6=$37500
d. a $30,000 increase in disposable income, if MPC equals0.25=$40000
8. Which of the following changes in tax income would lead to thesmallest increase in consumption?
a. a $20,000 decrease in taxes, if MPC equals 0.5
b. a $12,000 decrease in taxes, if MPC equals 0.75
c. a $15,000 decrease in taxes, if MPC equals0.6
d. a $30,000 decrease in taxes, if MPC equals 0.25
9. Marginal propensity to save is equal to the change in __________divided by the change in __________.
a. consumption spending; total income
b. saving; total income
c. saving;disposable income
d. consumption spending; disposable income
10. If the marginal propensity to consume is 0.60, the marginalpropensity to save will be:
a. greater than 0.60.
b. equal to 0.40.
c. equal to 0.60.
d. equal to 0. Above answers are for references, msg me if you need more infoor discuss using the chat Above answers are for references, msg me if you need more infoor discuss using the chat
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