1.The foreign purchases , interest rate and wealth effects help explain: A.why the consumption schedule remains stable when the price level changes B.the classical range of the aggregate supply curve C.the Keynesian range of the aggregate supply curve D.why the aggregate demand curve is down sloping 2. Which of the following would be considered to be one of the factors that shift the aggregate demand curve? A change in: A.domestic oil prices B.wages C.Business Write Offs increasing Business Spending D.Supplier Profit Expectations 3. Which of the following events would most likely decrease aggregate demand? A.an increase in government spending B.a reduction in business and personal tax rates C.an increase in investment spending D.an increase in personal income tax rates 4. Demand-pull inflation is associated with a(n) : A.increase in aggregate demand B.decrease in aggregate demand c.increase in the aggregate supply D.decrease in the aggregate supply 5. Other things being equal, the effect of a decline in net exports on GDP would cause the same change in AD as a(n) A.decline in consumption B.increase in consumption C.increase in investment D.Rightward shift in the investment demand curve 6. If a family's MPC is .7, it is: A.saving 70 percent of its total income B.operating at the break-even point C.spending seven -tenths of any additional income it receives 7. The amount by which the full-employment level of domestic output exceeds the level of short-run macroeconomic equilibrium can best be described as: (may help to draw out) A. a recessionary gap B.an inflationary gap C.a paradox of thrift 8. An increase in business taxes will likely cause a . SR Aggregate supply to increase c.LR Aggregate supply to increase d. LR Aggregate supply to decrease b . SR Aggregate supply to decrease 9. If the marginal propensity to consume in an economy is .80, government could eliminate a recessionary gap of $100 billion by increasing spending by a.$ 10 billion b.$20 billion c.$25 billion d.$40 billion 10. Other things being equal, if the interest rate falls and business taxes fall, investment spending a.is likely to decrease b.is not likely to change c.is likely to increase d.may increase, decrease, or stay the same 11. If a lump-sum tax of $40 billion is levied and the MPS is .25then GDP will a.decrease by $160 billion b.increase by $ 160 billion c.decrease by $120 billion d.decrease by $13 billion 12. Consider an economy that is currently in a recessionary gap. What would 1 happen in the long run, in the absence of any fiscal or monetary policy? A.in the long run, aggregate demand would eventually decrease due to decreased investment B.in the long run, aggregate demand would eventually increase due to decreased investment C.in the long run, wages would increase causing short run aggregate supply to decrease D.in the long run, wages would decrease , causing short run aggregate supply to increase 13. Suppose the MPC in an economy is 75. The Federal Government decides to increase spending by $100 B. To pay for the increase in spending the tax rate is increased to raise federal tax revenues by $100 B. Based on the multiplier theorieswhat would be the net change in GDP? A.100 B B.400 B C.0 D.300 B 14. Given an upward- sloping aggregate supply curve, an increase in aggregate demand results in a(n) A.Decrease in the price level and an increase in output in the short run B.Decrease in the price level and decrease in output in the short run C. increase in the price level and increase in output in the short run D.increase in the price level and decrease in output in the short run