Question 1(Muliiple Choice Worth 2 points) (0302 MC) When the marginal propensity to save is 0.4, the government decides to decrease the tax rates by $100 billion. What is the maximum impact on real GDP? 0 It will increase by as much as $150 billion. 0 It will increase by as much as $100 billion. 0 It will decrease by as much as $150 billion. 0 It will decrease by as much as $250 billion. 0 It will increase by as much as $250 billion. [:3 Question 2(Multiple Choice Worth 2 points) (03.01 MC) Use the graph to answer the question that follows. Price level AS P1/ P21 AD1 AD2 Y2 Y1 Output Which of the following changes could explain the reason for the shift in output from Y1 to Y2? O Increase in income tax rates O Decrease in input prices O Increase in household spending O Decrease in price level Increase in private investmentQuestion 3(Multiple Choice Worth 2 points) (03.03 MC) Workers resist any decrease in wages; therefore, any general decrease in price is generally associated with a decrease in real output This accurately describes O the sticky price of labor explaining the short-run aggregate supply curve's shape 0 any decrease in input costs leading to greater output 0 the real wealth effect on the short-run aggregate supply curve 0 the impact of a demand shock on the short-run aggregate demand 0 the relationship between wages and the interest rate [Q Question 4(Multiple Choice Worth 2 points) (03.04MC) In the long run, the aggregate output is primarily determined by the level of resources available in the economy. What does this statement tell us about the shape of the long-run aggregate supply curve? 0 The LRAS is a vertical line when aggregate output is plotted against price level. 0 The LRAS is an upward-sloping curve when aggregate output is plotted against price level. 0 The LRAS is a horizontal line when aggregate output is plotted against units of labor employed. 0 The LRAS is a horizontal line when aggregate output is plotted against price level. 0 The LRAS is a vertical line when aggregate output is plotted against units of labor employed. in: Question 5(Multiple Choice Worth 2 points) (03.08 LC) How can an expansionary scal policy be useful in an economy? 0 Decreasing money supply can help relieve inflationary pressures in the economy. 0 Increasing tax rates can help relieve inflationary pressures in the economy, 0 Decreasing tax rates can help relieve inationary pressures in the economy. 0 Increasing government expenditures can help relieve recessionary pressures in the economy. 0 Increasing money supply can help relieve recessionary pressures in the economy [Cl Question 6(Multiple Choice Worth 2 points) (03.02 MC) Assume that the marginal propensity to consume is 0.6. What is the significance of an increase in expenditure on the equilibrium real GDP? O A $1 increase in expenditure will increase the equilibrium real GDP by $2.50. O A $1 increase in expenditure will decrease the equilibrium real GDP by $2.50. O A $1 increase in expenditure will increase the equilibrium real GDP by $1.50. O A $1 increase in expenditure will decrease the equilibrium real GDP by $1.50. Being a function of autonomous components of government expenditure; there are no changes in the equilibrium real GDP.Question 7(Multiple Choice Worth 2 points) (03.08 MC) When the government wants to O expand; decrease; increase 0 expand; increase; decrease 0 contract; decrease; increase 0 contract; decrease; decrease O expand; increase; increase the economy, it will taxation to help aggregate demand and output. IE3 Question 8(Multiple Choice Worth 2 points) (03.03 LC) What is true about movement along the aggregate supply curve in the short run? O There is an inverse relationship between inflation and the unemployment rate. There is no direct relationship between inflation and the unemployment rate. There is a positive relationship between inflation and the unemployment rate. O An increase in inflation creates a demand shock that in turn increases the unemployment rate. There is an inverse relationship between the general price level and the wage rate.Question 9(Multiple Choice Worth 2 points) (03.07 MC) Suppose an economy is experiencing a positive demand shock. What will happen in the long run if the government doesn't intervene? O wages decrease; AD decrease; output decrease; unemployment decrease O wages increase; AD increase; output increase; unemployment increase 0 wages increase; AS decrease; output decrease; return to full employment 0 wages decrease; AS increase; output increase; return to full employment 0 wages increase; AS decrease; output increase; unemployment increase [D Question 10(Mumpie Choice Worth 2 points) (03.01 LC) In deriving AD, when the cost of borrowing to purchase goods and services increases, the quantity demanded for those goods and services will generally decrease. This is a description of the 0 interest rate effect to explain aggregate demand's negative slope 0 interest rate effect to explain aggregate demand's positive slope 0 cause of shifts in the aggregate demand model 0 impact of people's real wealth on aggregate demand 0 substitution effect explanation for the overstatement of ination [S Question \"(Multiple Choice Worth 2 points) (03.09 LC) How do automatic stabilizers work during times of an economic downturn? 0 Transfer payments will increase, and income tax revenues will decrease. 0 Transfer payments and income tax revenues will increase. 0 Transfer payments will decrease, and income tax revenues will remain the same. 0 Transfer payments will remain the same, and income tax revenues will decrease 0 Transfer payments and income tax revenues will decrease. [[2] Question 12(Multiple Choice Worth 2 points) (03.07 MC) An economy is operating with a significant inflationary gap. Based on this, what would happen in the long run? O Aggregate demand will increase. O Wages and factor prices will increase. O Potential real GDP will increase. The natural rate of unemployment will decrease. The short-run aggregate supply will shift right.Question 13(Multiple Choice Worth 2 points) (0305 MC) Use the following graph to answer the question that follows. Based on the graph, which of the following statements is true about this economy? 0 The economy is facing an inationary gap at point 2 because of higher demand for goods and services. 0 The economy is facing a recessionary gap at point P because of lower demand for goods and services. 0 The economy is facing an inationary gap at point A because of lower demand for goods and services. 0 The economy is facing a recessionary gap at point P because of higher demand for goods and services 0 The economy is facing an inationary gap at point 2 because of lower demand for goods and services. [C1 Question 14(Multiple Choice Worth 2 points) (03.08 LC) Which of the following accurately describes a limitation of fiscal policy? The spending multiplier will always be more effective than the tax multiplier because of savings. The government can have no direct impact on aggregate demand in the economy. The government can influence the price level but not real output or aggregate demand. The government has the ability to slow inflation but not close a recessionary gap. There is always a time lag to discretionary fiscal policy between action and impact.Question 15(Multiple Choice Worth 2 points) (03.03MC) Which of the following will shift the short-run aggregate supply curve (SRAS) to the left? O Decrease in resource availability O Decrease in wage rate O Decrease in price level O Increase in productivity O Decrease in corporate tax ratesQuestion 16(Multiple Choice Worth 2 points) (03.06 MC) Which of the following would directly lead to an actual unemployment rate exceeding the natural rate of unemployment? O A decrease in aggregate demand from an initial long-run equilibrium O An increase in aggregate demand from an initial long-run equilibrium O A decrease in short-run aggregate supply and an increase in aggregate demand An increase in short-run aggregate supply and an increase in aggregate demand O An increase in aggregate demand with no change in short-run aggregate supplyQuestion 17(Multiple Choice Worth 2 points) (03.04 LC) Which of the following resists change in the short run but becomes flexible in the long run? O Cyclical unemployment O Aggregate demand O Input prices O Real output O Nominal GDPQuestion 18(Multiple Choice Worth 2 points) (03.06 MC) Assuming that the economy is initially in a long-run equilibrium, which one of the following scenarios would result from a sudden increase in aggregate demand in the short run? O The economy will face inflation and a decrease in output. The economy will face depression and an increase in output. The economy will face stagflation and an increase in output. The economy will face inflation and an increase in output. The economy will face deflation and a decrease in output.Question 19(Multiple Choice Worth 2 points) (03.09 MC) In an overheating economy, is an example of an automatic stabilizer and is an example of discretionary fiscal policy that both would help close the inflationary gap. O increased tax revenues; a bill decreasing government spending O decreased tax revenues; enhanced Social Security benefits O increased tax revenues; a stimulus check to boost consumption O a bill decreasing government spending; letting a consumption subsidy expire O increased federal student loans; increased tax revenuesUse the graph to answer the question that follows. Price level LRAS SRAS2 JP /c SRAS1 B A AD2 AD1 E Real GDP Which point on the graph is the point of long-run equilibrium in the economy? OA OB OC OD OE