HELP FOR MACROECONOMICS QUESTIONS

Question2. All of the following events would cause a rightward shift in aggregate-demand EXCEPT:

a. A boom in the stock market that raises consumer wealth.

b. An investment tax credit that raises the rate of return on investment.

c. A recession abroad which decreases net exports.

d. The Fed increases the money supply.

e. An increase in government spending.

Question3: Which of following help explain the negative slope of the aggregate demand curve?

a. A lower price level increases real wealth, which encourages spending on consumption.

b. A lower price level reduces the interest rate, which encourages spending on investment.

c. A lower price level causes the real exchange rate to depreciate, which encourages spending on net exports.

d. All of the above.

e. None of the above.

Question12: filling the table

Show how the change in each variable will affects the ( AD)

Variable change	Component of AD affected	Impact on AD	Impact on AD
Wealth		1) 2)
Expected –Future Income		1) 2)
Taxes		1) 2)
G		1) 2)
Exchange rate		1) 2)

Question13: The mid-1970s experienced a sharp rise in the price level and a decline in real output. Which of the following events can best explain this outcome?

a. A drop in consumer confidence that causes a decrease in the AD curve.

b. An oil cutoff that results in a decrease in the SRAS curve.

c. An increase in the money supply that causes an increase in the AD curve.

d. The government temporarily removes burdensome regulations that cause an increase in the SRAS.

Question14: Suppose planned C + I + G + (X - M) exceeds actual output in a particular period. Which of the following best characterizes the behavior of this economy out of equilibrium?

a) Inventories will increase and there will be pressure for Y to decrease.

b) Inventories will increase and this acts as a signal to producers to produce more.

c) Inventories will decrease and there will be pressure for Y to increase.

d) Inventories will decrease and producers will cut back production.

e) The effect on production and inventories is indeterminate.

Question15: Which of the following are true about the definition of the marginal propensity to consume?

0. It is the slope of the consumption function.

0. It is the change in consumption divided by the change in disposable income.

0. It is the amount by which consumption spending rises when disposable income rises by one dollar.

0. All the definitions above are correct.

Question18 Use the following information to answer questions

Suppose Katherine has a linear consumption function. Taxes are 20% of her gross income. When her disposable income is $8,000, she spends all of her disposable income. When her gross income equals $20,000, she saves $2,000.

1. What is the implied marginal propensity to consume for Katherine?

a) .75 b) .65 c) .8 d) .85 e) .7

2. What is her consumption at the gross income level of $30,000?

a) 18,500 b) 19,000 c) 20,000 d) 25,000 e) 28,500

Question21: using the graph below answer the question (1-4)

1)As shown in Exhibit A-9, and assuming the aggregate demand curve shifts from AD1 to AD2, the full-employment level of real GDP is

a. $12 billion. b. $8 billion. c. $150 billion. d. unable to determined.

2. Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit A-9, the real GDP and price level (CPI) in long-run equilibrium will be

a. $8 billion and 150. b. $12 billion and 200. c. $8 billion and 250. d. $8 billion and 200.

3. Beginning from long-run equilibrium at point E1 in Exhibit A-9, the aggregate demand curve shifts to AD2. The real GDP and price level (CPI) in short-run equilibrium will be in billions

a. $12 and 200 b. $8 and 250. c. $8 and 150. d. $12 and 250.

4. Beginning from short-run equilibrium at point E2 in Exhibit A-9, the economy’s movement to a new position of long-run equilibrium would best be described as

a. a movement along the AD2 curve with a shift in the SRAS1 curve.

b. a movement along the SRAS2 curve with a shift in the AD2 curve.

c. a shift in the LRAS curve to an intersection at E1.

d. no shift of any kind.

Question22:

1. What is the definition of aggregate demand? What are the components of aggregate demand?

2. What relationship is expressed by the aggregate-demand curve? Draw a graph of the AD curve.

3. Why does the aggregate demand curve have a negative slope? Be specific.

5. What is aggregate supply?

6. Why is the long-run aggregate-supply curve vertical? What factors shift the long-run aggregate-supply curve?

7. Why does the short-run aggregate-supply curve slope upwards? What is the significance of an upward-slopping short-run aggregate-supply curve? What factors shift the short-run aggregate-supply curve?

14

Exhibit A-9 Aggregate Demand and Supply Model

0

2

4

8

1012

16

100

150

200

250

300

Price level

(CPI)

Real GDP

LRAS

6

14

AD

1

AD

2

E

1

E

2

E

3

SRAS

2

SRAS

1

•