Short-run contractions and expansions in economic activity are called
A. the business cycle.
B. recessions.
C. deficits.
D. expansions.
Answer: A
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Which of the following is a true statement about the multiplier?
A) The multiplier is a value between zero and one. B) The smaller the MPC, the larger the multiplier. C) The multiplier rises as the MPC rises. D) The multiplier effect does not occur when autonomous expenditure decreases.
Suppose that John allocates $10,000 of his disposable income for necessities. Any additional income beyond that is both spent and saved. Assume he has a disposable annual income of $50,000 and an MPC=0.8. Based on this information the additional amount spent on non-necessities should be:
A. $10,000. B. $40,000. C. $32,000. D. $35,000.
Which of the following would shift the aggregate demand curve to the right?
A. A lower future expected price level B. An increase in foreign income C. An appreciation of the value of a country's currency D. An increase in imports
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1. B. P2 and Y1. C. P2 and Y3. D. P1 and Y2.