Macro Unit 3

Which of the following does NOT explain the slope of the aggregate demand curve?

• the real wealth effect of a change in the aggregate price level

• the interest rate effect of a change in the aggregate price level

• the product-substitution effect of a change in the aggregate price level

• the exchange rate effect of a change in the aggregate price level

• a change in interest-sensitive consumer spending resulting from a change in interest rates

Which of the following will shift the aggregate demand curve to the right?

• an increase in wealth

• pessimistic consumer expectations

• an increase in the existing stock of capital

• contractionary fiscal policy

• an increase in the interest rate

The Consumer Confidence Index is used to measure which of the following?

• the level of consumer spending

• the rate of return on investments

• consumer expectations

• planned investment spending

• the level of current disposable income

Declines in the stock market decrease aggregate demand by decreasing which of the following?

• consumer wealth

• the price level

• the stock of existing physical capital

• interest rates

• tax revenues

Which of the following government policies will shift the aggregate demand curve to the left?

• an increase in government purchases of goods and services

• a decrease in government purchases of goods and services

• a decrease in taxes

• a decrease in interest rates

• an increase in government transfers

A change in consumer spending that results from a change in consumers' purchasing power is known as the ___________ effect of a change in the aggregate price level.

• interest rate

• exchange rate

• real wealth

• price

• income

A change in real GDP that results when the domestic price level increases relative to a foreign price level is the ___________ effect of a change in the price level.

• foreign

• exchange rate

• real wealth

• price

• income

If the MPS is equal to 0.1, what is the value of the expenditure multiplier?

• 0.1

• 0.9

• 1.11

• 9

• 10

An autonomous increase in aggregate spending of $100 million would lead to a total increase in real GDP of how much if the MPC is equal to 0.8?

• $80 million

• $100 million

• $125 million

• $500 million

• $800 million

The marginal propensity to consume

• has a negative relationship to the expenditure multiplier

• is always equal to 1

• represents the proportion of a consumer's income that is spent

• is equal to 1/MPS

• is the increase in consumption when disposable income increase by $1