Exam 23: Output and Prices in the Short Run

FIGURE 23-3 -Refer to Figure 23-3. Which of the following statements correctly describes the difference between the multipliers in response to an increase in autonomous expenditure) in Economy A and Economy B? The multiplier in Economy A is while the multiplier in Economy B is .

Over the horizontal range of the economyʹs AS curve assuming such a range exists), a rightward shift of the AD curve will result in

Which of the following would cause a positive aggregate demand shock, but leave the aggregate supply curve unaffected?

The aggregate supply curve tends to be relatively steep when GDP is above potential output because firms are operating above and are rising rapidly.

Consider the basic AD/AS model. When wage rates rise faster than the increase in labour productivity, the

If the economy is in macroeconomic equilibrium with a vertical AS curve, and then aggregate demand decreases, we expect the AE function to shift to a

An exogenous fall in the domestic price level causes an increase in real wealth and

Consider the basic AD/AS model. A rise in an input price like the wage rate would be expected to create a new macroeconomic equilibrium, which in comparison to the original equilibrium, has a price level that is

Consider a simple macro model with a given price level and demand-determined output. An exogenous change in the price level causes a

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.3 and a marginal propensity to import of 0.3. Economy B has a marginal propensity to consume of 0.9, a net tax rate of 0.1 and a marginal propensity to import of 0.3. Suppose there is an increase in autonomous investment of $5 billion in each of these economies. Which of the following statements is true?

Which of the following would likely cause an upward parallel shift in the AE curve and a rightward shift in the AD curve?

In a macro model with a constant price level, an increase in government purchases will cause the AE curve to shift

FIGURE 23-1 -Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P0. The corresponding point on the aggregate demand curve is point

The economyʹs AS curve is often assumed to be relatively flat at low levels of real GDP. The underlying reasoning is that

Other things being equal, a fall in the domestic price level leads to a rise in private -sector wealth and thus

FIGURE 23-1 -Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P0. Now, suppose the AE curve shifts to AE1 and we move to a new equilibrium level of GDP at Y1 and point A on AD0. A possible cause of this change in equilibrium is

Consider the simple multiplier when the price level is constant. We can say that national income is and that the simple multiplier measures the horizontal shift in in response to a change in autonomous desired expenditure.

The AD curve shows the relationship between

FIGURE 23-2 -Refer to Figure 23-2. Which of the following events could cause the upward shift of the AS curve?

Consider a simple macro model with a given price level and demand-determined output. An exogenous change in the domestic price level changes equilibrium real GDP