AP MACRO Unit review

A decrease in the price of inputs will result in which of the following in the short run?

• An increase in short-run aggregate supply and an increase in long-run aggregate supply

• An increase in short-run aggregate supply and a decrease in output

• An increase in short-run aggregate supply and a decrease in price level

• A decrease in aggregate demand and a decrease in price level

Assume that current real GDP falls short of full-employment output by $400 billion and the marginal propensity to consume is 0.8. What is the minimum increase in government spending that could bring about full employment?

• $40 billion

• $80 billion

• $400 billion

• $320 billion

Assume the economy is in long run equilibrium and the government increases spending on healthcare

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

Assume the economy is in long run equilibrium and trading partners increase the price of oil, a key resource

• AD will shift right and an inflationary gap will result

• AD will shift left and a recessionary gap will result

• AS will shift right and an inflationary gap will result

• AS will shift left and a recessionary gap will result

Contractionary fiscal policy includes

• Decreasing government spending

• Tax increases

• Tax decreases

• Increasing government spending

Expansionary fiscal policy includes

• Decreasing government spending

• Tax increases

• Tax decreases

• Increasing government spending

Assume that the marginal propensity to consume is 0.75, net exports decline by $10 billion, and government spending increases by $20 billion. Given that there is no crowding out, the equilibrium gross domestic product can increase by a maximum of

• $7.5 billion

• $15.5 billion

• $40 billion

• $120 billion

Progressive tax structure is when

• the tax rate declines as income increases

• the tax rate increases as income increases

• the tax rate remains the same, regardless of size of income

• the tax rate increases the total volume of consumer expenditures

The economy has a recessionary gap of $100 billion and a multiplier effect estimated to be 4. How much should the government increase spending by to eliminate the gap?

• $25 Billion

• $50 Billion

• $100 Billion

• $400 Billion

An increase in the price of a key input will cause the aggregate demand curve and the short-run aggregate supply curve to change in which of the following ways?

• AD shift to the right, SRAS shift to the right
• AD shift to the left, SRAS shift to the left
• AD shift to the left, SRAS no change
• AD no change, SRAS shift to the left