Question 1

Which of the following would most likely shift the supply curve for loanable funds to the right?

Accepted Answer

A rise in disposable income leading to higher private savings

Question 2

According to the rule of 70, how many years will it take for an economy growing at 3.5% per year to double its real GDP?

Accepted Answer

$$ \frac{70}{3.5} = 20 $$ years

Question 3

Which of the following is NOT a determinant of long-run economic growth?

Accepted Answer

Higher government spending on consumption

Question 4

What causes a movement along the per-worker production function?

Accepted Answer

An increase in capital per worker

Question 5

Which of the following best describes the convergence theory?

Accepted Answer

Poorer countries tend to grow faster than richer ones, leading to income convergence over time

Question 6

In the aggregate expenditure model, which of the following is NOT a component of aggregate expenditure?

Accepted Answer

Transfer payments

Question 7

If the marginal propensity to consume (MPC) is 0.8, what is the marginal propensity to save (MPS)?

Accepted Answer

$$ 1 - 0.8 = 0.2 $$

Question 8

Which of the following would cause a shift in the consumption function?

Accepted Answer

A change in consumer confidence

Question 9

How is the multiplier ($$k) $$calculated in the aggregate expenditure model?

Accepted Answer

$$ k = \frac{1}{1 - MPC} $$

Question 10

Which of the following best explains why the aggregate demand curve has a negative slope?

Accepted Answer

As the price level rises, the purchasing power of money falls, reducing real spending

Question 11

What causes a shift in the short-run aggregate supply (SRAS) curve?

Accepted Answer

A change in input prices, such as wages or oil

Question 12

Why is the long-run aggregate supply (LRAS) curve vertical?

Accepted Answer

Because output is independent of the price level in the long run

Question 13

Which of the following policies is most likely to foster technological change according to new growth theory?

Accepted Answer

Increasing subsidies for research and development

Question 14

If planned aggregate expenditure is less than real GDP, what will happen to inventories and output?

Accepted Answer

Inventories will rise and output will decrease

Question 15

Which of the following is a common failure in low-income countries that hinders economic growth?

Accepted Answer

Weak property rights and poor legal institutions

Question 16

In the AD-AS model, what does a rightward shift of the aggregate demand curve indicate?

Accepted Answer

An increase in the price level and real GDP

Question 17

Which of the following would most likely cause a recession in the AD-AS model?

Accepted Answer

A leftward shift in the aggregate demand curve

Question 18

If the government increases spending by $100 billion and the MPC is 0.75, what is the total increase in real GDP according to the multiplier effect?

Accepted Answer

$$ \frac{1}{1-0.75} 	imes 100 = 400 $$ billion

Question 19

Which of the following best describes a movement along the aggregate demand curve?

Accepted Answer

A change in the price level

Macroeconomics Study Guide: Financial Markets, Economic Growth, Aggregate Expenditure, and AD-AS Model

Study Guide - Practice Questions