Q1. An aggregate supply curve is usually flatter than the individual market supply curves for goods, services or labor for GDP levels below potential GDP. As a result a decrease in aggregate demand tends not to reduce the aggregate price level. This is an example of a(n)

a. macroeconomic externality.

b. microeconomic externality.

c, positive externality.

Q2. Keynesians believe that the government should ________ in managing the macroeconomy when ________.

a. not play a role; actions by consumers, firms, and trading partners fall short of expectations

b. play a role; there is inflation and unemployment

c. play a role; when the aggregate equilibrium does not match potential output.

Q3. If government spending increased by $5 billion and the expenditure multiplier is 3.2, what would be the increase in the real GDP?

a. $16 billion

b. $8.2 billion

c. $15 billion