If the marginal propensity to consume decreases, then

1. the marginal propensity to save will decrease by the same percentage.
2. the spending multiplier will decrease.
3. the money multiplier will decrease.
4. the rate of savings will decrease.
5. the spending multiplier will increase.

Which of the following best explains why the aggregate demand curve is down sloping?

1. Purchasing power increases as wealth decreases.
2. Low interest rates make American goods appear cheaper which increases net exports and the quantity of real output purchased.
3. Rising interest rates cause investment to increase.
4. As price levels increase, consumer spending increases.
5. As price levels decrease, demand for imports increases.

Economists who advocate the Keynesian theory of economics would say that prices and wages are

1. sticky and decreases in AD will decrease employment.
2. sticky and decreases in AD will decrease unemployment.
3. flexible and decreases in AD will decrease employment.
4. flexible and decreases in AD will decrease unemployment.
5. flexible and increases in AD will increase unemployment.

Suppose the legislature of Youngland voted to impose a protective tariff on microprocessor chips. Which of the following would be true in the short run?

• There will be a decrease in microprocessor chip production in Youngland.
• There will be a decrease in supply of microprocessor chips in Youngland.
• There will be an increase in microprocessor chip production by foreign nations.

1. I only.
2. II only.
3. III only.
4. I and III only.
5. II and III only.

If the Federal Reserve decreases the money supply, how will interest rates, the international value of the dollar, and exports be impacted as a result?

Interest Rates / Value of Dollar / Exports

1. Increase / Decrease / Increase
2. Increase / Increase / Decrease
3. Increase / Increase / Increase
4. Decrease / Decrease / Increase
5. Decrease / Increase / Decrease

Which of the following would cause the supply of pesos to decrease, ceteris paribus?

1. Ford opens automobile assembly plant in Mexico
2. Interest rates increase in the United States
3. Mexican GDP increases
4. Tourism in Mexico decreases due to an outbreak of the flu
5. Interest rates increase in Mexico

If Congress removes all tariffs on Chinese products in response to a new free trade agreement with China, then

1. imports will decrease.
2. aggregate supply will shift left.
3. aggregate demand will shift left.
4. resources will be used more efficiently.
5. fewer Chinese goods and services will be sold.

If exports from the United States increased, what would most likely happen to real gross domestic product and price level?

Real GDP / Price Level

1. Increase / Increase
2. Increase / Decrease
3. Increase / No Change
4. Decrease / Decrease
5. Decrease / Increase

If the Federal Reserve purchases securities, then

1. consumer spending will increase and AD will shift right.
2. consumer spending will decrease and AD will shift left.
3. government spending will increase and AD will shift right.
4. investment spending will increase and AD will shift right.
5. investment spending will decrease and AD will shift left.