What are the two basic principles of aggregation?
What will be an ideal response?
The two principles are the following:1. Although the composition of demand and supply in the various markets may be terribly important for some purposes (such as how income is distributed and the diets people enjoy), it may be of little consequence for the economy-wide issues of growth, inflation, and unemployment—the issues that concern macroeconomists.2. During economic fluctuations, markets tend to move up or down together.
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Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary
How does a free-market system address the output selection task?
What will be an ideal response?
Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and reserves account in the context of the Three-Sector-Model? a. The GDP Price Index rises and reserves account becomes more positive (or less
negative). b. The GDP Price Index falls and reserves account remains the same. c. The GDP Price Index and reserves account remain the same. d. The GDP Price Index rises and reserves account remains the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Figure 9-5
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If the shift in the C + I + (X ? IM) in Figure 9-5 was caused by a 80 dollar increase in investment, then the multiplier is
A. 0 B. 2 C. 3 D. 4 E. 5