Unit 3: National Income and Price Determination

The intersection of the aggregate demand and aggregate supply curve occurs at the economy’s equilibrium level of

• Nominal investment and the interest rate

• Government taxes and employment

• Real disposable income and unemployment

• Imports and Net exports

• Real domestic output and the price level

An increase in consumer spending will most likely cause the price level and real GDP to change in which of the following ways in the short-run?

• Price Level / Real GDP

  Increase / increase

• Price Level / Real GDP

  Increase /decrease

• Price Level / Real GDP

  Increase/ not change

• Price Level / Real GDP

  Decrease / increase

• Price Level / Real GDP

  Decrease / decrease

An decrease in the wages and production cost will most likely cause the price level and real GDP to change in which of the following ways in the short-run?

• Price Level / Real GDP

  Increase / increase

• Price Level / Real GDP

   Increase /decrease

• Price Level / Real GDP

  Increase/ not change

• Price Level / Real GDP

  Decrease / increase

• Price Level / Real GDP

  Decrease / decrease

A negative supply shock would most likely result in

• A decrease in aggregate demand

• A decrease in the general price level

• A decrease in national income

• An increase in employment

• An increase in nominal GDP

A positive supply shock, such as a decrease in the price of oil, is most likely to have which of the following short-run effects on the price level and output?

• Price Level / Output

  Increase / Indeterminate

• Price Level / Output

  Increase / Decrease

• Price Level / Output

  Decrease / Decrease

• Price Level / Output

  Decrease / Increase

• Price Level / Output

  Indeterminate / Decrease

If exports from the United States increased, what would most likely happen to real gross domestic product and price level?

• Real GDP / Price Level

  Decrease / Decrease

• Real GDP / Price Level

  Increase/ Increase

• Real GDP / Price Level

  Decrease / Increase

• Real GDP / Price Level

  Increase / Decrease

• Real GDP / Price Level

  Increase / No change

Stagflation might be caused by

• Increase in technology

• Decrease in the price of raw materials

• Increase in the price of raw materials

• Decrease in the money supply

• Increase in the money supply

Which of the following would cause a leftward shift in aggregate demand?

I. Congress increases personal income taxes

II. An increase in government spending on public goods

III. A recession in another country that is a close trading partner

• I only

• II only

• III only

• I and III only

• I, II, and III

Which of the following would cause a rightward shift of the aggregate supply curve?

• An increase in the costs for production

• A tax cut for consumers

• An across-the-board reduction of wages in the manufacturing sector

• Inflationary expectations

• The shutdown of plants and movement of production of goods abroad

The formula to calculate the expenditures or simple multiplier is

• 1/MPC

• 1/1-MPS

• 1/1-MPC

• MPC/MPS

• MPS/MPC