51) Other things being equal, a closed economy will have a ________ marginal propensity to spend and thus a ________ AD curve compared to an open economy with foreign trade.

A) lower; flatter

B) higher; flatter

C) higher; steeper

D) lower; rightward shift of the

E) lower; leftward shift of the

Answer:  B

Diff: 3

Topic:  23.1c. slope and shifts of the AD curve

Skill:  Applied

User2:  Qualitative

52) Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.1 and a marginal propensity to import of 0.1. Economy B has a marginal propensity to consume of 0.6, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Suppose there is a decrease in autonomous investment of $5 billion in each of these economies. Which of the following statements is true?

A) The AD curve shifts farther to the left in Economy A than Economy B.

B) The AD curve shifts farther to the right in Economy A than Economy B.

C) The AD curve shifts to the left the same amount in both economies.

D) The AD curve shifts to the right the same amount in both economies.

E) The simple multiplier is larger in Economy B.

Answer:  A

Diff: 3

Topic:  23.1c. slope and shifts of the AD curve

Skill:  Applied

Objective:  NEW

User2:  Quantitative

53) Consider the simple multiplier when the price level is constant. We can say that national income is ________ and that the simple multiplier measures the horizontal shift in ________ in response to a change in autonomous desired expenditure.

A) demand determined; the AS curve

B) unit-cost determined; the AD curve

C) constant; the AD curve

D) demand determined; the AD curve

E) constant; the AE curve

Answer:  D

Diff: 2

Topic:  23.1c. slope and shifts of the AD curve

Skill:  Recall

Objective:  NEW

User2:  Qualitative

54) Aggregate supply refers to the

A) decisions of firms to decrease inputs in order to produce outputs.

B) effects of increases in input prices on output.

C) economy's potential output at each possible labour force.

D) supply of labour inputs in the economy.

E) total output firms wish to produce at each price level.

Answer:  E

Diff: 1

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

55) The economy's aggregate supply (AS) curve shows the relationship between the

A) equilibrium real GDP and marginal cost.

B) equilibrium real GDP and desired consumption.

C) price level and the marginal propensity to consume (MPC).

D) price level and the total output that firms wish to produce and sell, with technology and input prices held constant.

E) price level and the total output that firms wish to produce and sell, as technology and input prices vary.

Answer:  D

Diff: 1

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

56) The economy's aggregate supply (AS) curve shows the relationship between the price level and the total

A) investment that firms wish to make, with input prices given.

B) investment that firms wish to make, as input prices vary.

C) output that firms wish to produce and sell, with input prices given.

D) output that firms wish to produce and sell, as input prices vary.

E) wealth accumulated by households, with national income given.

Answer:  C

Diff: 1

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

57) The aggregate supply (AS) curve is drawn with which variables on the axes of the graph?

A) the price level on the vertical axis and MPC on the horizontal axis

B) national income on the vertical axis and total desired consumption on the horizontal axis

C) the price level on the vertical axis and real national income on the horizontal axis

D) national income on the vertical axis and marginal cost on the horizontal axis

E) the price level on the vertical axis and real disposable income on the horizontal axis

Answer:  C

Diff: 1

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

58) The aggregate supply curve relates the price level to the quantity of output that firms would like to produce and sell, given the assumption that

A) technology and the prices of all factors of production remain constant.

B) unit costs remain constant.

C) all firms are price takers.

D) all firms are price setters.

E) technology and the prices of all factors of production do not remain constant.

Answer:  A

Diff: 2

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

59) In the short run, the aggregate supply curve has a positive slope because, as the price level rises, producers can

A) accumulate inventories.

B) be compensated for the extra costs incurred to produce more output.

C) experience rising factor prices.

D) produce less in response to falling profits.

E) increase output at unchanged unit costs.

Answer:  B

Diff: 1

Topic:  23.2. slope and shifts of the AS curve

Skill:  Recall

User2:  Qualitative

60) In building a macro model with an AS curve, it is assumed that producers will

A) increase prices without changing their output.

B) decrease their prices without changing output.

C) decrease their prices when they expand output.

D) produce as much as possible at the existing price level.

E) produce more output only if prices rise.

Answer:  E

Diff: 2

Topic:  23.2. slope and shifts of the AS curve

Skill:  Applied

User2:  Qualitative

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