Question

If consumer confidence decreases then aggregate demand will

increase and output and price level will increase as well.
decrease and output and price level will decrease as well.
increase and output will increase but price level will decrease.
increase and output will decrease but price level will increase.
decrease and output will decrease but price level will increase.

Question 4(Multiple Choice Worth 3 points)
If Congress passes a plan to cut the national debt in half by increasing personal income taxes, then

there is no change in the AD curve as SRAS has decreased.
AD shifts right and price level would decrease.
AD shifts left and price level would decrease.
AD shifts right and price level would increase.
AD shifts left and the price level would increase.

Question 5(Multiple Choice Worth 3 points)
Assume Angela’s disposable income is $800 and her boss gives her a $100 raise. Her consumption increased from $600 to $650. Which of the following is true?

MPC = .8
MPS = .8
MPC = .75
MPS = .75
MPC = .5

Question 6(Multiple Choice Worth 3 points)
The value of the expenditure multiplier increases when

tax rates increase.
the marginal propensity to consume increases.
the marginal propensity to consume decreases.
the average propensity to consumer increases.
the average propensity to consume decreases.
Question 7(Multiple Choice Worth 3 points)
Disposable Income Consumer Spending
$10,000 $7,500
$12,000 $8,500


Given the information in the table above, calculate the MPS for this economy.
.5
.75
.8
.2
.1

Answer 1

if consumer confidence decreases then aggregate demand will

decrease and output will decrease but price level will increase.

If Congress passes a plan to cut the national debt in half by increasing personal income taxes, then
AD shifts left and price level would decrease

Question 5(Multiple Choice Worth 3 points)
Assume Angela’s disposable income is $800 and her boss gives her a $100 raise. Her consumption increased from $600 to $650. Which of the following is true?
MPC = .75


The value of the expenditure multiplier increases when
tax rates increase.
the marginal propensity to consume increases.

Disposable Income Consumer Spending
$12,000