5

If the marginal propensity to consume is 4/5, the simple multiplier is

The real value of dollar-denominated assets will fall.

What is the effect of an increase in the price level?

True

When the real estate market in the United States crashed in 2006, it caused a significant decline in net wealth. True or False?

True.

A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve. True or False?

$60 billion increase in equilibrium real GDP demanded

If the multiplier is 3, a $20 billion increase in autonomous consumption will cause a

an upward shift of the aggregate expenditure line

Which of the following would result from a decrease in autonomous saving?

injections exceed leakages

The economy will expand if

inventories will increase

In the income-expenditure framework, if planned aggregate expenditures are less than real GDP,

increase the level of aggregate quantity demanded

A decrease in the price level will

shift the aggregate expenditure line downward

An increase in the price level will

inventories will decrease

In the income-expenditure framework, if planned aggregate expenditures are greater than real GDP,

The lower the MPC, the lower the multiplier.

Which is true regarding the marginal propensity to consume and the multiplier?

upward and cause a movement along the aggregate demand curve

A fall in the price level will shift the aggregate expenditure curve

the aggregate expenditure line shifts downward by $15 billion

On the aggregate expenditure graph, if autonomous saving increases by $15 billion,

autonomous investment

Suppose that a pair of graphs represents a situation in which both the aggregate expenditure line and the aggregate demand curve have shifted. You can conclude that the shift of the aggregate expenditure line was caused by a change in

result in a movement down and to the right along the aggregate demand curve

A decrease in the price level will

True

If there are no unintended changes in inventories, the economy is at its equilibrium level of real GDP demanded. True or False?

people who lost jobs or feared they would lose their jobs started spending less

Job losses soon after the September 11 attacks could be viewed as just part of the first round of reduced aggregate expenditure. The second round occurred when

how much additional income is spent on consumption

What does the marginal propensity to consume tell us?

Help wanted advertising is higher than usual, and the consumer price index is up more than expected.

Which of the following would be strong evidence that an expansionary gap exists?

prices for firms' output are rising with the price level

Among the reasons firms find it profitable to expand output in the short run when the price level is rising faster than expected is that

profits will increase

A rising price level in the short run may create an incentive for firms to increase production because

The actual price level and the expected price level are equal.

Which of the following is true in the long run?

actual short-run output minus potential output

An expansionary gap is equal to

False.

Aggregate supply is the relationship between aggregate demand and the quantities of aggregate output firms are willing and able to produce, other things constant. True or False?

output increases and the price level decreases

As a contractionary gap is closed in the long run,

economy will move leftward along the short-run aggregate supply curve

Given implicit or explicit resource price agreements, if the actual price level is below the expected price level, the

firms decrease production in the short run

If the expected price level exceeds the actual price level,

expected price level equals the actual price level

The potential output of an economy is the level of output produced when the

The aggregate demand curve is horizontal at the potential output level.

If the economy is simultaneously in long-run and short-run equilibrium, which of the following is not true?

decrease in the price level and no change in output

In the long run, a decrease in aggregate demand will cause a(n)

increase output in the short run when the price level increases

Fixed resource prices help explain why firms

increase output and lower the price level

Given the aggregate demand curve, a beneficial supply shock would

reduce output if some resource prices are fixed by contracts

If the expected price level exceeds the actual price level, then firms will