Quizzes

Question 1

What will cause price level to increase in the long run?

Answer 1

• decrease in the money supply

Question 2

Natural disaster in the midwest will do what to the AS curve?

Answer 2

• shift it

Question 3

Marginal propensity to consume can never be zero (true or false)?

Answer 3

• true

Question 4

The Vietnam War led to economic overheat so policymakers _____.

Answer 4

• enacted a temporary tax surcharge

Question 5

Taxes are reduced by x amount which leads to a y increase in income. Value of the tax multiplier is _____

Answer 5

• - x/y

Question 6

The size of the multiplier depends on _____

Answer 6

• marginal propensity to consume

Question 7

An economy’s marginal propensity to consume is 0.9 and the marginal propensity to import is 0.1. An increase in gov’t spending of $2000 will lead to an increase in income by _____.

Answer 7

• The problem is to find the intercept between the consumption function and the 45° line. This means finding the intercept between y = (.9 - .1)x + 2000 and y = x, and then finding the x intersection. So x = 2000/.2

Question 8

Disposable income…

Answer 8

• increases when income increase

Question 9

The larger the propensity to import, the larger the multiplier in an open economy. True or false?

Answer 9

• false