Exam 23: Output and Prices in the Short Run

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?

The aggregate supply curve will shift as a result of a change in 1)the wage rate; 2)the price level; 3)technology.

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

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will initially cause

One of the reasons why the aggregate demand (AD)curve slopes downward is that

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.

Consider two economies,A and B.Economy A has a marginal propensity to consume of 0.9,a net tax rate of 0.1 and a marginal propensity to import of 0.1.Economy B has a marginal propensity to consume of 0.6,a net tax rate of 0.2 and a marginal propensity to import of 0.2.Suppose there is a decrease in autonomous investment of $5 billion in each of these economies.Which of the following statements is true?

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Other things being equal,an exogenous rise in the domestic price level will

Consider the relationship between the AE curve and the AD curve.A rise in the amount of desired consumption,investment,government purchases,or net exports at any given level of national income

Consider the following news headline: "Threat of widespread labour unrest leads to generous wage increases in several industries." Choose the statement below that best describes the likely macroeconomic effects.

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 .Other things being equal,exogenous changes in the price level will cause

FIGURE 23-5 -Refer to Figure 23-5.Suppose that an increase in government purchases by 50 causes the AD curve to shift to the right,as shown.The simple multiplier is ________ and the multiplier is ________.

All points on an economy's AD curve

Consider the basic AD/AS model.If their unit costs rise as output increases,price-taking firms will be prepared to produce ________ only if ________.

Consider the nature of macroeconomic equilibrium.If,at a particular price level,aggregate output demanded is less than that supplied by producers,then

FIGURE 23-5 -Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

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

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.