FINANCE

37. The effect of an increase in aggregate supply is a (an): A) increase in the general level of prices and a decrease in real output. B) increase in the general level of prices and an increase in real output. C) decrease in the general level of prices and a decrease in real output. D) decrease in the general level of prices and an increase in real output. 38. Demand-pull inflation is associated with a (an): A) decrease in the aggregate supply curve. B) increase in the aggregate supply curve. C) increase in the aggregate demand curve. D) decrease in the aggregate demand curve. E) decline in the availability of a productive resource 39. A tax is proportional if, as a person’s income rises, the: A) tax rate is constant. B) tax rate falls. C) tax rate rises. D) amount of the tax is constant. E) amount of the tax falls. 40. The net exports effect is the inverse relationship between net exports and the ____ of an economy. A) potential real GDP B) chain-price deflator C) price level D) consumption spending 41. Exhibit 14-4 Aggregate supply and demand curves nar003-1.jpg In Exhibit 14-4 which of the following is not consistent with a shift in the aggregate demand curve from AD1 to AD2? A) A decrease in consumer spending. B) An increase in investment. C) An increase in government spending. D) An increase in net exports. 42. The fraction of each added dollar of income that is used for consumption is called the: A) average propensity to consumer (APC). B) autonomous consumption rate (ACR). C) marginal consumption propensity (MCP). D) marginal propensity to consume (MPC). 43. A decrease in real GDP would affect the U.S. economy by: A) cutting tax revenues and raising government expenditures. B) cutting government expenditures and raising tax revenues. C) raising both tax revenues and government expenditures. D) cutting both government expenditures and tax revenues. 44. Exhibit 14-8 Aggregate demand and supply nar005-1.jpg In Exhibit 14-8, if aggregate demand shifts from AD1 to AD2, A) real GDP will increase from $3.0 to $7.0, and the price level will remain the same. B) real GDP will increase from $3.0 to $4.0, and the price level will remain the same. C) real GDP and the price level will both remain the same. D) real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. 45. Exhibit 14-8 Aggregate demand and supply nar005-1.jpg In Exhibit 14-8, when aggregate demand shifts from AD4 to AD5, the economy experiences: A) cost push-inflation. B) cost-pull inflation. C) demand-push inflation. D) demand-pull inflation. E) price-pull inflation. 46. Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years? A) Income security. B) National defense. C) Education and health. D) Interest on the national debt. 47. If aggregate demand increases in the intermediate range of the aggregate supply curve then the: A) price level rises and real GDP falls. B) price level rises and real GDP rises. C) price level falls and real GDP falls. D) price level falls and real GDP rises. 48. Which of the following can be classified as a regressive tax? A) Excise tax. B) Sales tax. C) Gasoline tax. D) All of the above. 49. Exhibit 14-4 Aggregate supply and demand curves nar003-1.jpg In Exhibit 14-4, point E2 represents: A) real GDP above full-employment GDP. B) real GDP that equals full-employment GDP. C) a depression. D) real GDP below full-employment GDP. 50. Which of the following is an example of a progressive tax? A) The excise tax on cigarettes. B) The federal tax on gasoline. C) The federal personal income tax. D) All of the above. 51. Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport. The departure tax follows the: A) benefits-received principle. B) ability-to-pay principle. C) flat-rate taxation principle. D) public-choice principle. 52. Exhibit 14-2 Aggregate supply and demand curves nar001-1.jpg A shift in the aggregate supply curve in Exhibit 14-2 from AS1 to AS2 would be caused by a (an): A) decrease in input prices. B) increase in input prices. C) increase in real GDP. D) decrease in real output. 53. When price level in the United States rises, A) there is a increased demand for borrowed money. B) producers’ demand for new machinery increases, contributing to an increase in aggregate demand. C) Americans tend to buy more foreign goods and services. D) the French, Canadians, and Japanese would find our exports more attractive. E) to replenish the value of your real wealth, you would save less and consume more. 54. If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing: A) government spending by $250 billion. B) taxes by $100 billion. C) taxes by $1,000 billion. D) government spending by $1,000 billion. 55. The marginal propensity to consume (MPC) is computed as the change in: A) consumption divided by the change in savings. B) consumption divided by the change in income. C) consumption divided by the change in GDP. D) None of the above. 56. If the marginal propensity to save (MPS) is 0.10, the value of the spending multiplier is: A) 1. B) 9. C) 10. D) 90. 57. Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP? A) $300 decrease in taxes. B) $75 increase in government spending. C) $75 decrease in taxes. D) $300 increase in government spending. E) $75 decrease in government spending. 58. Exhibit 16-4 Marginal tax rate lines

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