Download MANDATORYHWKTST3

AP ECONOMICS---Ippolito
Name: ________________________
Homework for Test #3 “Re-take”
Due: Tuesday November 13th
This is mandatory for any student who scored below a 68% on Test # 3
Directions:
a)
b)
c)
d)
Step 1: Please answer the questions listed below
Step 2: Provide written answers to the following test questions from your last test (be efficient—get right to the point)
Please turn-in stapled packet on Tuesday November 13th
Your Test Grade will be adjusted based on the effort in this homework
Problems:
1) The AD/AS Model is the key to Macroeconomics. Understanding how this model works is essential to be successful in this
course
 Please answer the following regarding the AS/AD model
Price
Level
LRAS
SRAS
AD
Y1
Real
GDP
1) Why is the AD downward sloping?
2) Provide 4 examples of what would shift AD to the right
3) Why is the SRAS upward sloping?
4) Provide 4 examples of what would shift SRAS & LRAS to the right
5) Provide 2 examples of what would shift only SRAS to the right
6) Modify the above graph for expansionary fiscal policy and label the new short run equilibrium (label it E2 or B)
7) Find the LONG RUN equilibrium (label it E3 or C)
CIRCLE THE CORRECT ANSWER &
PROVIDE A CLEAR EXPLANATION WHY
1. Which of the following is not a reason the aggregate demand curve slopes downward?
As the price level falls:
a. wealth decreases, consumer consume more
b. interest rates fall, consumers consume more
c. interest rates fall => the dollar depreciates => U.S. exports more
d. all listed are true
e. Only B & C are true
Answer is E
Explanation:
2. Which of the following shifts aggregate demand right?
a. an increase in government expenditures or a decrease in the price level
b. a decrease in government expenditures or an increase in the price level
c. an increase in government expenditures, but not a change in the price level
d. a decrease in the price level, but not an increase in government expenditures
e. none listed shift AD
Answer is C Explanation:
5. Other things the same, the aggregate quantity of goods demanded in the U.S. increases if
a. real wealth falls
b. interest rate rise
c. european economies enter a period of higher GDP growth
d. european economies enter a period of recession
e. A, B, & C all increase AD
Answer is C Explanation:
9. Which of the following shifts the long-run aggregate supply right?
a. an increase in either physical or human capital stock
b. an increase in human but not physical capital stock
c. an increase in physical capital stock, but not human capital stock
d. an decrease in technology
e. Both A & D
Answer is A Explanation:
14. Of the following theories, which is consistent with a vertical long-run aggregate supply curve?
a. the sticky-wage & sticky price theory
b. the flexible wage & flexible price theory
c. the vertical law of full employment
d. the natural rate of ouput equilibirum theory
Answer is B Explanation:
17. Suppose the economy is in long-run equilibrium. In a short span of time, there is a tax increase and a pessimistic
revision of expectations about future business conditions. We should expect short run equilibrium to show which
effect:
a. the price level and real GDP both to rise.
b. the price level and real GDP both to fall.
c. the price level and real GDP both to stay the same.
d. All of the above are possible.
Answer is B Explanation:
18. Suppose the economy is in long-run equilibrium. Which of the following must be true:
a. Economic Equilibrium on SRAS = Equlibrium LRAS
b. GDP is at the natural rate of output
c. The Economy is at full-employment
d. All of the above must be true (A, B & C)
e. None listed above are true (A, B & C are not true)
Answer is D Explanation:
e.
21. Keynes believed all of the following except
a. high unemployment rates would quickly lead to lower wages & lower prices
b. The SRAS curve was horizontal
c. short run prices were sticky
d. short run wages were sticky
e. Keynes believed all listed
Answer is A Explanation:
22.
23. In the short run an increase in government expenditures
a. raises the price level, but not real GDP.
b. raises real GDP, but not the price level.
c. raises real GDP and the price level.
d. raises neither real GDP nor the price level.
e. decreases the price level but raises real GDP
Answer is C Explanation:
24.
25. Suppose that in a closed economy GDP is $11 trillion, consumption is $7 trillion, taxes are $3 trillion and the
government runs a surplus of $1 trillion. What are private savings:
a. $4 trillion
b. $3 trillion
c. $2 trillion
d. $1 trillion
e. $0.5 trillion
Answer is D Explanation:
26.
27. In a closed economy, private saving is
a. income that households have left after paying for their taxes and consumption.
b. income that businesses have left after paying for the factors of production.
c. tax revenue that the government has left after paying for its spending.
d. always equal to investment.
e. equal to total income minus taxes
Answer is A Explanation:
28. Which statement is correct on the loanable funds market
a. The supply curve represents investment
b. The demand curve represent savings
c. The supply curve represents national savings
d. The supply curve represents only private savings
e. The demand curve represents government investment
Answer is C Explanation:
32. If the MPC = .75 , then the government spending and investment multiplier is:
a. 4
b. 3
c. 2
d. 1
e. 1 1/3
Answer is A
Explanation:
33. Which of the following correctly explains the crowding-out effect?
a. An increase in government expenditures => leads to more bonds bought by Gov’t =>
which increases demand of loanable funds => which leads to higher interest rates
b. An increase in government expenditures => leads to more bonds sold by Gov’t => which
increases demand of loanable funds => which leads to higher interest rates
c. An increase in government expenditures => leads to more bonds sold by Gov’t => which
decreases supply of loanable funds => which leads to higher interest rates
d. none listed are correct
Answer is C Explanation:
34. If the marginal propensity to consume (MPC) is .80, a $20 billion increase in government expenditures would shift
the aggregate demand curve right by
a. $80 billion, but the effect would be larger if there were crowding out.
b. $80 billion, but the effect would be smaller if there were crowding out
c. $100 billion, but the effect would be larger if there were crowding out
d. $100 billion, but the effect would be smaller if there were crowding out
e. none lsited are correct
Answer is D
Explanation:
36. Which of the following is not an automatic stabilizer?
a. the minimum wage
b. the unemployment compensation system
c. the federal income tax
d. the welfare system
e. all listed are automatic stablizers
Answer is A
Explanation: