Question

32.   The economy is experiencing substantial short-run unemployment.  The long-run aggregate supply curve is ___________.  In the long run,...

32.   The economy is experiencing substantial short-run unemployment.  The long-run aggregate supply curve is ___________.  In the long run, there will be _________ in the aggregate price level.
A.   horizontal, an increase
B.    horizontal, a decrease
C.    vertical, an increase
D.   vertical, a decrease

33.   The less sensitive households are to changes in interest rates, ______________, for a given increase in the aggregate price level.
A.   the more the aggregate demand curve will shift to the left
B.    the less the aggregate demand curve will shift to the left
C.    the steeper the aggregate demand curve will be
D.   the flatter the aggregate demand curve will be

34.   Each of the following will increase aggregate demand except
A.   an increase in wealth.
B.    a decrease in imports.
C.    a decrease in interest rates.
D.   an increase in saving.

35.  In the national income accounts, welfare payments would be classified as
A.   a consumption expenditure.
B.    an investment expenditure.
C.    a government expenditure.
D.   none of the above.

36.  Disposable income can be used for each of the following purposes except
A.   personal consumption expenditures.
B.    personal income tax payments.
C.    personal saving.
D.   personal transfer payments to foreigners.

37.  If net exports decrease, aggregate _________ will shift to the _________ in the short run.
A.   demand; right
B.    demand; left
C.    supply; right
D.   supply; left

38.  Households choose to increase the amount that they save.  The most likely short-run effect is that aggregate _________ would __________.
A.   demand; increase
B.    demand; decrease
C.    supply; increase
D.   supply; decrease

39.  Households choose to increase the amount that they save.  The most likely short-run effect is that the aggregate price level will __________ and the level of unemployment will __________.
A.   increase; increase
B.    increase; decrease
C.    decrease; increase
D.   decrease; decrease

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Answer #1

34. D. an increase in saving.

Increase in saving means decrease in consumption expenditure which reduces AD and shifts AD leftwards.

35. C. a government expenditure.

Government spending includes spending of government on social welfare.

36. C. personal saving.

Disposable income = Income - Taxes + Transfer payments

37. B. demand; left

AD = C + I + G + Net Exports

Decrease in net exports decreases AD and shifts AD leftwards.

38. B. demand; decrease

Increase in saving means decrease in consumption expenditure causes decrease in AD and shifts AD leftwards.

39. C. decrease; increase

Decrease in AD shifts AD leftwards causes decrease in aggregate price level and increases unemployment.

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