Question

5. Macro equilibrium always occurs when: B. The labor force is fully employed. D. The level...

5. Macro equilibrium always occurs when:

B. The labor force is fully employed.
D. The level of output is expanding.
A. Aggregate supply is greater than aggregate demand.

C. Aggregate demand equals aggregate supply at the average price level of the economy.

3. Which of the following can be used to stimulate the economy?

D. Reducing government purchases.
B. Increasing government purchases.
C. Increasing government taxation.

A. Raising interest rates through reductions in the money supply.

1. If Investment initially changes by $200 billion, and the MPC = .8, then total spending will eventually change by

$240 billion.
$160 billion.
$1000 billion.
$200 billion.
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Homework Answers

Answer #1

5. Macro equilibrium always occurs when:
C. Aggregate demand equals aggregate supply at the average price level of the economy.
Explanation: At equilibrium, AS = AD

3. Which of the following can be used to stimulate the economy?
B. Increasing government purchases.
Explanation: Increase in G results in shfiting out of the AD curve. This leads to higher output.

1. If Investment initially changes by $200 billion, and the MPC = .8, then total spending will eventually change by
Ans. $1000 billion.
Explanation
Multiplier = 1/(1-0.8) = 5
Change in spending = 5 x 200 = 1000

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