Unit 3: National Income and Price Determination Exam

An increase in which of the following will most likely promote economic growth?

• Taxes on investment

• The price level

• Human Capital

• Consumption of non-durable goods

• Interest rates

Which of the following will cause aggregate supply to increase in Country X?

• An increase in personal income taxes

• The discovery of low-cost alternative sources of energy

• A decrease in labor productivity with no change in nominal wages

• Depreciation of country X's currency on the foreign exchange market

• An increase in the price level

An increase in the price of oil, an important input to production, will result in which of the following in the short run?

• A decrease in the price level

• A decrease in short-run aggregate supply

• A decrease in unemployment

• An increase in real wages

• An increase in aggregate demand

An economy is currently operating at the full-employment level of output. Which of the following would result in a recessionary gap in the short-run?

• An increase in the costs of production

• An improvement in the productivity of labor

• An increase in the money supply

• A positive supply shock

• A decrease in income tax rates

Thailand and Malaysia are trading partners. If the price level in Thailand decreases relative to the price level in Malaysia, what will happen to Thailand's exports to Malaysia and Thailand's aggregate demand?

• Thailand's exports increase and Thailand's aggregate demand decrease

• Thailand's exports increase and Thailand's aggregate demand increase

• Thailand's exports increase and Thailand's aggregate demand indeterminate

• Thailand's exports decrease and Thailand's aggregate demand decrease

• Thailand's exports decrease and Thailand's aggregate demand increase

Which of the following is a fiscal policy action aimed at reducing unemployment?

• Decreasing government expenditures

• Decreasing income taxes

• Decreasing tax credits

• Increasing nominal interest rates

The marginal propensity to save is .25, a $15 billion increase in government spending will lead to an increase in national income by a maximum of

• $60 billion

• $45 billion

• $15 billion

• $11.25 billion

• $3.75 billion

During a period of stagflation, a nation is most likely experiencing

• high unemployment and low inflation

• low unemployment and high inflation

• low inflationary expectations

• a decrease in short-run aggregate supply

• an increase in taxes and government spending

An economy is in short-run equilibrium at a level of output that it greater than potential output. If there were no active fiscal or monetary policy intervention, which of the following changes would occur in the long run?

• Output: Increase PL: Decrease

• Output: Increase PL: Increase

• Output: Decrease PL: Decrease

• Output: Decrease PL: Increase

• Output: No Change PL: No change

An increase in which of the following will most likely cause an increase in aggregate demand and inflation in the short run?

• income tax rates

• input prices

• government spending

• real interest rates

• savings