Unit 3 Review (Macro)

Aggregate demand may be measured by adding
[select all that apply]

• consumption

• investment

• government spending

• net exports

• domestic expenditures

Which of the following changes would cause an economy’s aggregate demand curve to shift to the right?

• An increase in spending on imports

• An increase in consumption spending

• An increase in interest rates

• A decrease in the overall price level in the economy

As a component of aggregate demand, investment refers to the

• purchase of raw land for later resale

• purchase of stocks and bonds

• purchase of new equipment and additional inventories

• dividends paid out to shareholders

Under which of the following conditions would consumer spending most likely increase?

• Consumers have large unpaid balances on their credit cards.

• The government encourages consumers to increase their savings

• Consumers believe they will not receive pay increases next year.

• Consumers’ wealth is increased by changes in the stock market

A high marginal propensity to consume implies which of the following?

• A small change in consumption when income changes

• A high savings rate

• An equilibrium level of income near full employment

• A low marginal propensity to save

A change in which of the following will cause the short-run aggregate supply curve to shift
[select all that apply]

• The price level

• Government spending

• The cost of all inputs

A decrease in labor productivity will shift the:

• aggregate demand curve to the right

• aggregate demand curve to the left

• short-run aggregate supply curve to the right

• short-run aggregate supply curve to the left

The graph above shows the macroeconomic conditions of Wattsonia. Many economists estimate that the natural rate of unemployment is 6 percent. If this is true and the current rate of unemployment is 5.1 percent, in what range of real gross domestic product is the economy currently producing?

• Less than Y1

• At Y1

• At Y2

• Greater than Y2

• Greater than Y1 and less than Y2

Given the graph of the short-run aggregate supply and long-run aggregate supply curves above,

which of the following is true?

• At point Z, the economy has cyclical unemployment.

• At point Y, the natural rate of unemployment is zero.

• At point X, the economy is experiencing a recessionary gap.

• At point Z, the economy is in long-run equilibrium but not in short-run equilibrium.

A contractionary supply shock would most likely result in

• an increase in aggregate demand

• an increase in national income

• a decrease in the general price level

• a decrease in employment