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ECON PRACTICE EXAM 3
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ECON PRACTICE EXAM 3
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ECON PRACTICE EXAM 3In the long run, output gaps are eliminated by - answer- price changes
In the short run______ determines output, and in the long run______ determines
output. - answer- Total spending; potential output
In the long run, total spending only influences: - answer- inflation
In the long run total spending affects_____ and output is determined by______. -
answer- prices;inputs and productivity
"Smart" vending machines, which adjust prices automatically according to changes in
demand factors (like time of day or outside temperature), are examples of: - answer-
flexible price setting
Firms do not change prices frequently because: - answer- it is costly to do so
When actual investment is greater than planned investment: - answer- firms sold less
output than expected
In the Keynesian model, consumption depends on: - answer- disposable income
The slope of the consumption function: - answer- equals the mpc
The tendency of changes in asset prices to affect spending on consumption goods is
called the _____ effect. - answer- wealth
Suppose the stock market crashed, wiping out $5 trillion of household wealth.
Consistent with economic models based on historical trends, consumption spending
might fall by as much as, but probably not more than, - answer- $350 trillion
In the short run with predetermined prices, when output is greater than planned
aggregate expenditure: - answer- planned investment is less than actual investment
For an economy starting at potential output, a decrease in autonomous expenditure in
the short run results in a(n): - answer- recessionary output gap
The smaller the mpc, the _____ the income-expenditure multiplier and the ______ the
effect of a change in autonomous spending on short-run equilibrium output. - answer-
smaller;smaller
In the Keynesian model, a $1 billion increase in autonomous consumption leads to
_______ in short run equilibrium output: - answer- a greater than $1 billion increase
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