Hi, I need help with a 10 multiple choice questions for a test based on Aggregate Demand? Thanks in advance.Question 1 According to Keynes, the economy can be in macro failure if: a. Aggregate demand is too little to produce full employment b. Aggregate demand is too much and an inflationary gap results c. Aggregate demand is too unstable to produce price stability and full employment d. All of the above 10 points Question 2 A fall in consumer spending: a. Can cause macro instability b. Is not likely to cause macro instability c. Cannot be offset by an increase in investment spending d. Is always due to a fall in income 10 points Question 3 The United States has a high average propensity to consume. This means: a. The marginal propensity to consume is low b. The average rate of saving is high c. Americans consume a large portion of the total disposable income d. On average the propensity to save is high 10 points Question 4 In a recessionary gap: a. The equilibrium real GDP is above full employment real GDP b. Cyclical unemployment is falling c. Aggregate demand does not equal aggregate supply d. Equilibrium real GDP is less than full employment real GDP 10 points Question 5 Changes in business investment spending: a. Are not a source of macro instability b. Are frequent and are a major source of macro instability c. Did not occur after September 11th 2001 d. Are rarely caused by changes in expectations 10 points Question 6 Aggregate demand will shift to the right if consumers: a. Have a decline in wealth b. Are more confident about the economic future c. Receive a tax increase d. Consumers are heavily in debt and pull back their spending 10 points Question 7 A consumption function is: C = 500 + .80 Yd. This means: a. Consumers will save 80 cents out of each additional dollar in disposable income b. Consumers will spend 500 in addition to current income c. Consumers will spend 500 out of current income d. The marginal propensity to consume is .20 10 points Question 8 The marginal propensity to consume is equal to: a. The change in consumer spending divided by the change in disposable income b. Total consumer spending divided by total income c. Disposable income divided by consumption d. The change in disposable income divided by the change in consumption 10 points Question 9 Which of the following is not an influence on investment spending? a. Expectations b. Technology and innovation c. Wealth d. Interest rates 10 points Question 10 Macro failure is defined as: a. When the market fails to produce goods and services b. When aggregate supply does not intersect aggregate demand c. When equilibrium real GDP is less or greater than full employment d. When aggregate demand equals aggregate supply
