AP Macro Unit 3

The short-run aggregate supply curve will shift to the right when

• energy prices increase
• government regulation increases
• prices of inputs decrease
• productivity rates decrease
• business investment decreases

The long-run aggregate supply curve will shift to the right when

• foreign exports increase

• government spending increases

• investment increases

• consumption increases

• population decreases

If Mr. Woodward's disposable income increases from $600 to $650 and his level of personal consumption expenditures increase from $480 to $520, you may conclude that his marginal propensity to

• consume is 0.8

• consume is 0.4

• save is 0.8

• save is 0.4

• consume is .6

If the MPC is .80, the government spending multiplier is:

• 4

• 5

• 3

• 2

Which of the following is MOST likely to promote economic growth?

•  A decrease in business tax credits for investment spending
• A decrease in federal student education grants
• An increase in investment in tools and machinery
• A decrease in the labor force participation rate

The long run aggregate supply curve is vertical because...

• Price level increases but GDP doesn't

• GDP increases but price level doesn't

• GDP decreases but price level doesn't

• Price level decreases but GDP doesn't

The long run aggregate supply curve is also known as

• structural unemployment

• Full-employment

• The natural rate of employment

• Cyclical unemployment

Changes in price level

• Shift the AD curve left (decrease)

• Shift the AD curve right (increase)

• Move along the AD curve

• Shift the AS curve right (increase)

• Shift the AS curve left (decrease)

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

• No change will result

The LRPC is vertical because

• In the long run there is no tradeoff between inflation and unemployment

• In the long run there is no tradeoff between price level and GDP

• In the long run there is no tradeoff between price and quantity demanded

• In the long run there is no tradeoff between two production options