1. Which of the following would not be an expected response from a
decrease in the price level and so help to explain the slope of the
aggregate-demand curve?
a. When interest rates fall, In-and-Out Convenience Stores decides
to build some new stores.
b. The exchange rate falls, so French restaurants in Paris
buy more Kansas beef.
c. Tyler feels wealthier because of the price-level decrease and so he
decides to remodel his kitchen.
d. With prices down and wages fixed by contract, Fargo Concrete
Company decides to lay of f workers
2. Unemployment insurance and welfare programs work as
automatic stabilizers.
a. True
b. False
3. Scenario 35-2. The following facts apply to a small economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2. In response to which of the following events could
aggregate demand increase by $1,500?
a. A stock-market boom stimulates consumer spending by $300, and
there is an operative crowding-out effect.
b. An economic boom overseas increases the demand for U.S. net
exports by
$550, and there is no crowding-out effect.
c. A stock-market boom stimulates consumer spending by $550, and
there is a small operative crowding-out effect.
d. An economic boom overseas increases the demand for U.S. net
exports by
$300, and there is no crowding-out effect
, 4. . One of President Obama’s first policy initiatives was a stimulus
bill that included large increases in government spending.
a.
True
b.
False
.
5. When the Federal Reserve decreases the federal funds target rate,
the lower rate is achieved through
a. sales of government bonds, which reduces interest rates and causes
people to hold less money.
b. sales of government bonds, which reduces interest rates and causes
people to hold more money.
c. purchases of government bonds, which reduces interest rates
and causes people to hold less money.
d. purchases of government bonds, which reduces interest rates
and causes people to hold more money.
6. If the marginal propensity to consume is 0.75, and there is no
investment accelerator or crowding out, a $15 billion increase in
government expenditures would shift the aggregate demand curve
right by
a. $60 billion, but the effect would be smaller if there were
an investment accelerator.
b. $60 billion, but the effect would be larger if there were
an investment accelerator.
c. $45 billion, but the effect would be larger if there were
an investment accelerator.
d. $45 billion, but the effect would be smaller if there were
an investment accelerator.
7. If the stock market booms, then
a. aggregate demand increases, which the Fed could offset by purchasing
bonds.
b. aggregate demand increases, which the Fed could offset by selling bonds.
c. aggregate supply increases, which the Fed could offset by selling bonds.
d. aggregate supply increases, which the Fed could offset by purchasing
decrease in the price level and so help to explain the slope of the
aggregate-demand curve?
a. When interest rates fall, In-and-Out Convenience Stores decides
to build some new stores.
b. The exchange rate falls, so French restaurants in Paris
buy more Kansas beef.
c. Tyler feels wealthier because of the price-level decrease and so he
decides to remodel his kitchen.
d. With prices down and wages fixed by contract, Fargo Concrete
Company decides to lay of f workers
2. Unemployment insurance and welfare programs work as
automatic stabilizers.
a. True
b. False
3. Scenario 35-2. The following facts apply to a small economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2. In response to which of the following events could
aggregate demand increase by $1,500?
a. A stock-market boom stimulates consumer spending by $300, and
there is an operative crowding-out effect.
b. An economic boom overseas increases the demand for U.S. net
exports by
$550, and there is no crowding-out effect.
c. A stock-market boom stimulates consumer spending by $550, and
there is a small operative crowding-out effect.
d. An economic boom overseas increases the demand for U.S. net
exports by
$300, and there is no crowding-out effect
, 4. . One of President Obama’s first policy initiatives was a stimulus
bill that included large increases in government spending.
a.
True
b.
False
.
5. When the Federal Reserve decreases the federal funds target rate,
the lower rate is achieved through
a. sales of government bonds, which reduces interest rates and causes
people to hold less money.
b. sales of government bonds, which reduces interest rates and causes
people to hold more money.
c. purchases of government bonds, which reduces interest rates
and causes people to hold less money.
d. purchases of government bonds, which reduces interest rates
and causes people to hold more money.
6. If the marginal propensity to consume is 0.75, and there is no
investment accelerator or crowding out, a $15 billion increase in
government expenditures would shift the aggregate demand curve
right by
a. $60 billion, but the effect would be smaller if there were
an investment accelerator.
b. $60 billion, but the effect would be larger if there were
an investment accelerator.
c. $45 billion, but the effect would be larger if there were
an investment accelerator.
d. $45 billion, but the effect would be smaller if there were
an investment accelerator.
7. If the stock market booms, then
a. aggregate demand increases, which the Fed could offset by purchasing
bonds.
b. aggregate demand increases, which the Fed could offset by selling bonds.
c. aggregate supply increases, which the Fed could offset by selling bonds.
d. aggregate supply increases, which the Fed could offset by purchasing
