Unit 3: National Income and Price Determination

The aggregate demand curve is downward sloping because of all of the following effects EXCEPT the

An increase in aggregate demand will cause the greatest increase in real GDP when

An increase in short-run aggregate supply could be caused by

If the marginal propensity to consume (MPC) is 0.8, the maximum change in aggregate demand from a $100 billion increase in government spending is

Assume that the marginal propensity to consume is 0.75. If the government wants to close a recessionary gap of $60 billion, by how much should it increase government spending?

With an MPC of 0.75, the government wants to close a recessionary gap of $60 billion using only tax cuts. The tax cut must be

Stagflation is best described as

Assume the economy is in long-run equilibrium. A sudden increase in oil prices would most likely cause

The long-run aggregate supply curve is vertical because

In the Keynesian aggregate expenditure model, if planned investment exceeds actual investment,

If the economy is operating at a level of real GDP above full employment, which of the following will occur in the long run?

Fiscal policy refers to

Which of the following is an example of an automatic stabilizer?

Consider an economy with an MPC of 0.9. If taxes are increased by [math]10 billion, what is the net effect on GDP?

During a recession, which of the following combinations of fiscal policy actions would be most appropriate?

If the government decreases personal income taxes, the immediate effect is to shift

The multiplier effect means that

In the AD-AS model, if the economy is in a recessionary gap and no policy action is taken, the long-run self-correction mechanism works through

Which of the following would shift the aggregate demand curve to the left?

If the MPC is 0.8, the spending multiplier is 5. If the government increases spending by [math]20 billion, what is the net change in GDP?