Macroeconomics Quiz

The multiplier effect refers to

• government regulations that affect the GDP

• any change in aggregate expenditures always decreases GDP

• any change in aggregate expenditures creates a bigger change in GDP

• the MPS will always be greater than 1

• none of the above

All of the following will cause the aggregate demand curve to shift EXCEPT

• a change in consumer income

• a change in price level

• a decrease in government spending

• an increase in net exports

• an increase in net imports

Which of the following factors will shift the aggregate supply curve to the right?

• an increase in productivity

• increased wages for workers

• an increase in government regulations

• consumer income increases

• none of the above

The aggregate supply curve

• is best explained by the interest rate effect

• shows the amount of real output that producers are willing and able to produce at each price level

• is upward sloping because of the real balances effect

• reflects the amount of real output that consumers are willing and able to purchase at each price level

• becomes vertical in the short run

Other things being equal, a shift of the aggregate supply curve to the left could be caused by all of the following EXCEPT

• an increase in government regulation

• a decrease in workers' wages

• a decrease in the labor force

• an increase in taxes

• a decrease in productivity

The interest rate effect suggests

• a decrease in the money supply will increase interest rates

• an increase in the price level will increase the demand for money

• an increase in the price level will lead consumers and businesses to borrow more money, which increases the interest rate

• a decrease in the price level will lead consumers and businesses to borrow more money, which increases the interest rate

• an increase in the price level will lead consumers and businesses to borrow less money, which increases the interest rate

The multiplier effect will be greater on aggregate demand if

• there is no increase in the price level

• both aggregate demand and aggregate supply increase

• both aggregate demand and aggregate supply decrease

• aggregate demand increases and aggregate supply decreases

• cannot be determined because the up-to-date foreign exchange rate is not given

Imagine that investment increases by $10 billion and the MPC (marginal propensity to consume) is 0.8. In the long run, the aggregate demand curve will shift

• leftward by $30 billion at each price level

• rightward by $5 billion at each price level

• rightward by $80 billion at each price level

• leftward by $18 billion at each price level

• rightward by $50 billion at each price level

Inflation will most likely occur when

• aggregate supply and aggregate demand increase

• aggregate supply and aggregate demand decrease

• aggregate supply decreases and aggregate demand increases

• aggregate supply increases and aggregate demand decreases

• a price ceiling is placed above the equilibrium point between aggregate supply and aggregate demand

The government increases the minimum wage. How will this increase in labor costs affect the economy in the short run?

• Short-run aggregate supply will decrease

• Aggregate demand will increase

• Long-run aggregate supply will increase

• Aggregate demand will decrease

• Short-run aggregate supply will increase