1. Which of the following is not a component of aggregate demand?
a. Consumption
b. Investment
c. Government expenditures
d. The supply of money
e. Net exports
2. In the Great Depression, prices in the United States fell by 33 percent. Ceteris paribus, this led to an increase in aggregate demand through three channels: the ____ effect, the interest rate effect, and the international trade effect.
3. President George W. Bush and Congress lowered taxes in 2001, 2003, and 2008. Ceteris paribus, these decreases in taxes shifted the aggregate demand curve to the ____.
4. If the MPC is 0.9, the simple multiplier will be ____.
5. Because of other economic factors, such as taxes, the multiplier in the United States is ____ (larger/smaller) than 2.5.
6. Opening Export Markets. Suppose a foreign country, which originally prevented the United States from exporting to it, opens its market and U.S. firms start to make a considerable volume of sales. What happens to aggregate demand?
7. Calculating the MPC. In one year, a consumer s income increases by $200 and her savings increases by $40. What is her marginal propensity to consume?
8. Saving Behavior and Multipliers in Two Countries.
Consumers in Country A have an MPS of 0.5 while consumers in Country B have an MPS of 0.4. Which country has the higher value for the multiplier?
9. State and Local Governments and Aggregate Demand. If state governments cut back their spending to balance their budgets, what will happen to aggregate demand?