Question 1

2pts

If government expenditure on goods and services increases by $20 billion, then aggregate demand function

Group of answer choices

decreases by more than $20 billion.

increases by more than $20 billion.

decreases by $20 billion.

increases by less than $20 billion.

increases by $20 billion.

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Question 2

2pts

If government expenditures increased by $200 million and the marginal propensity to save is 0.25 what would be the effect on GDP?

Group of answer choices

$100 million

$200 million

$250 million

$500 million

$800 million

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Question 3

2pts

If interest rates increase, what will be the effect in the consumption function?

Group of answer choices

Consumption function will shift down (decrease).

Consumption function will become less steep (slope decreases).

No effect on consumption function.

Consumption function will shift up (increase).

Consumption function will become more steep (slope increases).

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Question 4

2pts

If government expenditures increased by $100 million and the marginal propensity to consume is 0.80 what would be the effect on GDP?

Group of answer choices

$80 million

$100 million

$250 million

$500 million

$750 million

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Question 5

2pts

If the discretionary income in a nation rises from $13 trillion to $15 trillion and consumption spending increases from $12 trillion to 13.5 trillion what is the marginal propensity to consume?

Group of answer choices

0.00

1.00

0.50

0.25

0.75

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Question 6

2pts

If interest rates increase, what will be the effect in the investment function?

Group of answer choices

Investment function will shift down (decrease).

Investment function will become more steep (slope increases).

No effect on investment function.

Investment function will shift up (increase).

Investment function will become less steep (slope decreases).

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Question 7

2pts

If the government reduces expenditure on goods and services by $30 billion, then aggregate demand function

Group of answer choices

increases and potential GDP increases.

decreases and potential GDP decreases.

increases and real GDP increases.

decreases and real GDP decreases.

increases and potential GDP decreases.

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Question 8

2pts

If people's expectations about future income improve so they think their future income will be higher than previously believed, then the aggregate demand function

Group of answer choices

will not shift but potential GDP will increase.

will shift up because people will increase spending now.

will not change until income actually rises.

will shift downward because people will spend less now.

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Question 9

2pts

If firms' expectations about the future become more pessimistic, what will be the effect in the investment function?

Group of answer choices

Investment function will shift down (decrease).

Investment function will shift up (increase).

No effect on investment function.

Investment function will become more steep (slope increases).

Investment function will become less steep (slope decreases).

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Question 10

2pts

If SRAS increases, prices will _______ and real GDP will ________

Group of answer choices

decrease; increase

increase; increase

be unchanged; increase

be unchanged; be unchanged