Increase Not change
Increase Increase
Not change Not change
Not change Decrease
Decrease Decrease
Which of the following statements is true?
If consumers expect a severe recession, the aggregate demand curve will shift to the right.
If the government reduces defense spending, the aggregate demand curve will shift to the right.
If personal income taxes are drastically increased, the aggregate supply curve will shift to the right.
If there are large crop failures, the aggregate supply curve will shift to the right.
If there is an increase in the money supply, the aggregate demand curve will shift to the right.
An increase in spending in an economy will cause a multiplied increase in gross domestic product because
government spending is greater than zero
investment increases as income decreases
Consumption increases as income increases
taxes increase as income increases
all of the above
If real gross domestic product for some year is $800 billion and the money supply is $200 billion, then the velocity of money is
(A) 0.25 (B) 2.5 (C) 4.0 (D) 16.0 (E) not enough information to answer
Within the aggregate demand-aggregate supply framework, an increase in government expenditure will
reduce the price level
reduce the level of nominal gross domestic product
Increase real gross domestic product if the economy is below full employment
shift the long-run aggregate supply curve to the right
shift both the long-run aggregate demand curve and the long-run aggregate supply curve to the left
If the price level decreases, the real wealth of a society and the interest rates will most likely change in which of the following ways?
Real Wealth Interest Rates
Increase Increase
Increase Decrease
Increase No change
Decrease Increase
Decrease Decrease
The diagram shows two different demand curves for holding money balances (MD). The money supply is MS and the initial equilibrium rate of interest is r1.
What could have caused a rise in the rate of interest from r1 to r2?
(A) A increase in imports
(B) An increase in savings
(C) A rise in the price level
(D) An increase in unemployment
(E) All of the above
What will be the effect of a fall in taxes, accompanied by the decrease in government spending by the same amount on the levels of unemployment and investment?
Unemployment Investment
(A) Increase Increase
(B) Increase Reduction
(C) Reduction Increase
(D) Reduction Reduction
(E) No change No change
Keynes believed that persons who would sell bonds in order to hold idle cash probably
(A) regard the present interest rate as unusually high
(B) regard present bond prices as below normal
(C) expect bond prices to rise
Expect the interest rate to rise
expect the interest rate to fall
Which of the following is done to avoid double counting in the valuation of national output?
(A) Expenditures on consumption goods are excluded.
(B) Payments of salaries to public employees are excluded.
(C) Total inventories are subtracted from gross output.
(D) Total profits are subtracted from gross income.
(E) Unemployment insurance payments are subtracted from total expenditures.
If the interest rate is 10 percent, then a dollar due two years from now has a present discounted value of
(A) $0.83 (B) $0.91 (C) $1.00 (D) $1.10 (E) $1.21
In the diagram, a change in the pattern of saving in the economy causes a shift in the consumption function
from C1 to C2.
According to the Keynes’ two-sector model, what are the effects of this change on the marginal propensity to save and on the level of saving?
Marginal propensity to save Level of Saving
(A) Decreases Increases
(B) Increases Decreases
(C) Decreases Decreases
(D) Decreases Does not change
(E) Does not change Does not change
One way to reduce the "natural rate" of unemployment would be to
(A) raise the minimum wage rate
(B) pursue an expansive fiscal policy
(C) pursue an expansive monetary policy
(D) increase job information
(E) increase unemployment benefits
Personal tax cuts that cause government budget deficits to increase will have the LEAST effect on interest rates when the tax cuts are:
(A) targeted to marginal taxpayers rather than to average taxpayers
(B) targeted to those who save little of their income
(C) offset by increased private saving in anticipation of higher interest payments on future government debt
offset by increased government spending of goods and services
accompanied by increased subsidies and other transfer payments to business
The expenditures on the construction of the new office of the central bank this year will influence investment component when calculating GDP in the following way: