Assume that the marginal propensity to consume is 0.9. If the government decreases spending by $50 billion at the same time that it decreases taxes by $50 billion, what would be the maximum impact on aggregate demand? (2 points)

	A decrease of $9 billion
	A decrease of $10 billion
	A decrease of $50 billion
	A decrease of $950 billion
	No change

Which of the following could explain a rightward shift of the short-run aggregate supply curve? (2 points)

	An increase in business investment
	An increase in the personal income tax rate
	A nominal wage increase
	An increase in the price level
	A decrease in business regulation

Movement up the short-run aggregate supply curve would correspond to (2 points)

	a decrease in employment output
	a decrease in the unemployment rate
	an increase in real output due to lower input costs
	an increase in real output and the price level
	a supply shock

Which of the following is true about the characteristics of the long-run aggregate supply curve and the production possibilities curve? (2 points)

	Resources are fully employed in both curves.
	Price is an important variable to determine the curves.
	A rightward shift in the long-run aggregate supply curve resembles a leftward shift of the production possibility curve.
	A leftward shift in both long-run aggregate supply curve and production possibility curve reflects an increase in the total output.
	A production possibility curve is constructed when all the inputs are fixed, and in the case of the long-run aggregate supply curve, all the inputs are flexible.

LRAS Price Level SRAS C A ADZ ADy ADX Real GDP