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ECON-1012-B-Introduction to Macroeconomics

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Fact 11.3.1

An economy has a fixed price level, no imports, and no income taxes and its MPC is 0.5.

Refer to Fact 11.3.1. If real GDP is $300 billion when investment increases by $10 billion, what is the new level of real GDP?
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When disposable income increases, which of the following events occur?
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How does a household allocate its disposable income?
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Which of the following statements about an economy's aggregate demand is correct?
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If real GDP is less than potential GDP, which of the following equilibrium describes the economy's situation?
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An economy is at full employment, the price level is 100, and the multiplier is 2. If investment increases by $10 billion, how does real GDP change?

In the short run ________, and in the long run ________.
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Which of the following situations illustrates how fiscal policy can influence aggregate demand?
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Short Description: A set of four graph of price level versus real G D P. Long Description: The vertical axis of each graph is labelled, price level and the horizontal axis is labelled, real G D P. The graph are as follows.(a) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D right to their point of intersection.(b) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D at their point of intersection. (c) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D left to their point of intersection.(d) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D left to their point of intersection.

Figure 10.3.3

Refer to Figure 10.3.3, which shows the AS-AD model in which an economy is in the short-run macroeconomic equilibrium in graph (a). How would you expect the government to respond to its current macroeconomic equilibrium?
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Short Description: A graph of price level versus real G D P. Long Description: The vertical axis is labelled, price level (G D P deflator, 20 12 = 100) and ranges from 60 to 110 in increments of 10 with a kink near the origin. The horizontal axis is labelled, real G D P (billions of 20 12 dollars) and ranges from 320 to 520 in increments of 40 with a kink near the origin. The line for S A S slopes upward from the lower left corner to the upper right corner passing through the points (340, 70) and (400, 85). The line for A D slopes downward from the upper left corner to the lower right corner, passing through the points (360, 100), (400, 85), and (440, 70). The line for L A S is a vertical line from the point (440, 0) on the horizontal axis passing through the point (440, 70).

Figure 10.3.1

Refer to Figure 10.3.1, which shows the AS-AD model in which an economy is in short-run macroeconomic equilibrium. Which of the following statements (1) and (2) is correct and which is incorrect?

(1)The economy is in an above full-employment equilibrium.
(2)As the economy adjusts to long-run equilibrium, the SAS curve will shift rightward.

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Which of the following statements about the macroeconomy is not the Keynesian view?
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