Suppose investment spending falls and as a result firms reduce their level of production of g and services. We call this a supply shock. True False

Question 3 of 16 Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest to smallest. Largest MPC   Smallest MPC   Answer Bank Bert Doug Eli Carter Al     Name Income change Consumption change Al +$5,000+$5,000 +$3,000+$3,000 Bert +$2,500+$2,500 +$800+$800 Carter +$1,000+$1,000 +$800+$800 Doug −$2,500−$2,500 −$1,750−$1,750 Eli −$5,000−$5,000 −$2,000−$2,000

"Fracking" is a relatively new technology that allows drillers to extract significantly larger quantities of natural gas from existing deposits than was previously possible. How is this discovery likely to affect the economy? (Hint: Think about whether this will have a short-run or long-run effect.) This discovery will likely: O increase both SRAS and LRAS, leading to a long-term increase in output and decrease in prices. O increase AD but decrease both SRAS and LRAS, leading to an uncertain change in long- term output and a decrease in prices. decrease both SRAS and LRAS, leading to a long-term decrease in output and increase in prices. O increase AD, SRAS, and LRAS, leading to a long-term increase in output and an uncertain change in prices.

Question 35 Suppose real estate analysts expect that 100,000 homes will be needed in a particular community by 2014. If the current number of homes in the community is only 50,000, we can expect to see a significant increase in the demand for investment. True O False

New help with D, E, F, G

PRICE LEVEL Point Q Point S. Point O. a Point P. LRAS R 20 S O AD₁ QUANTITY OF OUTPUT Suppose the economy starts at Point R. If there is a reduction in tax on investment, then in the short run the economy moves to AD₂ AD SRAS

Refer to the following figure   1. For this economy, if the actual price level exceeds theexpected price level, how much output will the economyproduce in the short-run? A)$17 trillionB)$17.2 trillionC)$16.7 trillionD) Both A and C.2. Given the situation in part (a), this economy wouldexperience A) a recessionary gap of $0.3 trillionB) an expansionary gap of $0.2 trillionC) neither a recessionary gap nor an expansionary gap.D) an expansionary gap of $17.2 trillion.   3. Given the situation in part (a), in this economy (circlethe letter representing the right answer below)A) the actual rate of unemployment would be less than thenatural rate of unemployment.B) the actual rate of unemployment would be above the naturalrate of unemployment.C) the actual rate of unemployment would be equal to thenatural rate of unemployment.D)none of the above.4. In this economy, given the situation in part (a), in thelong-run (circle the letter representing the right answerbelow)A) the nominal wage…

Refer to Figure 12-3. Suppose the economy is at point C. If investment spending decreases in the economy, where will the eventual long-run equilibrium be? Figure 12-3 Price level (GDP deflator, 2000100) OA O O B C D LRAS SRAS, SRAS * AD₁ AD₂ 0 None of the above Real GDP (trillions of 2000 dollars)

Let's assume that prices substantially increased over the past year. How do you expect this will affect people's buying behavior? Be sure to tie this back to economic concepts discussed in this course. Time Atten 33 M.

$2 S₁ S₂ 園 D D₁ Da (A) r S₁ $2 D₂ (B) St S₂ Y Y (C) (D) Which of the diagrams in Figure 26-7 shows an economic recession caused primarily by a change aggregate demand (A) (B)