Study Game - Topic 3.1 - Aggregate Demand, Topic 3.2 - Multipliers

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Use this game to study Topics 3.1 - 3.2 of AP Macroeconomics.

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Zachary Foust

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Study Game - Topic 3.1 - Aggregate Demand, Topic 3.2 - Multipliers


Study Game - Topic 3.1 - Aggregate Demand, Topic 3.2 - MultipliersOnline version Use this game to study Topics 3.1 - 3.2 of AP Macroeconomics. by Zachary Foust 1 Define aggregate demand (AD). a Output demanded, different price levels b Output supplied, different price levels c Quantity demanded at different prices d Quantity supplied at different prices 2 Define the wealth effect. a Price level rises; C falls b Price level rises; I falls c Price level rises; XN falls d Price level rises; C rises 3 Define the interest rate effect. a Price level rises; C falls b Price level rises; I falls c Price level rises; XN falls d Price level rises; C rises 4 Define the foreign purchases effect. a Price level rises; C falls b Price level rises; I falls c Price level rises; XN falls d Price level rises; C rises 5 Define consumer confidence. a Feelings of households b Feelings of businesses c Portion of additional income spent d Portion of additional income saved 6 Define business sentiment. a Feelings of households b Feelings of businesses c Portion of additional income spent d Portion of additional income saved 7 Define marginal propensity to consume (MPC). a Factor that spending changes GDP b Factor that taxes change GDP c Portion of additional income spent d Portion of additional income saved 8 Define marginal propensity to save (MPS). a Factor that spending changes GDP b Factor that taxes change GDP c Portion of additional income spent d Portion of additional income saved 9 Define expenditure multiplier. a Factor that spending changes GDP b Factor that taxes change GDP c Portion of additional income spent d Portion of additional income saved 10 Define tax multiplier a Factor that spending changes GDP b Factor that taxes change GDP c Portion of additional income spent d Portion of additional income saved 11 Assume that homeowners are wealthier after a boom in the housing market. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 12 Assume that Congress increases spending on surface-to-air missiles. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 13 Assume that the dollar depreciates against other currencies. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 14 Assume that the Federal Reserve announces lower interest rates. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 15 Assume that businesses are optimistic about the future state of the economy. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 16 Assume that the stock of available housing is small. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 17 Assume that Congress votes to increase Social Security payments for the elderly. Why would AD shift right? a Consumer spending increases b Investment spending increases c Government spending increases d Exports increase and imports decrease 18 Assume that households are worried about the future of the economy. Why would AD shift left? a Consumer spending decreases b Investment spending decreases c Government spending decreases d Exports decrease and imports increase 19 Assume that Congress raises personal income taxes. Why would AD shift left? a Consumer spending decreases b Investment spending decreases c Government spending decreases d Exports decrease and imports increase 20 Assume that the price level in Mexico decreases relative to the price level in the U.S. Why would AD shift left in the United States? a Consumer spending decreases b Investment spending decreases c Government spending decreases d Exports decrease and imports increase 21 Assume that the marginal propensity to consume (MPC) is 0.8, and government spending rises by $1 billion. What is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 22 Assume that the marginal propensity to consume (MPC) is 0.75, and investment spending rises by $5 billion. What is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 23 Assume that the marginal propensity to save (MPS) is 0.1, and government spending rises by $2 billion. What is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 24 Assume that the marginal propensity to save (MPS) is 0.25, and consumer spending falls by $10 billion. What is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 25 Assume that the MPC is 0.9. If net exports rise by $10 billion and government spending falls by $8 billion, what is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 26 Assume that the marginal propensity to consume (MPC) is 0.75, and Congress increases taxes by $5 billion. What is the maximum change in real GDP? a $5 billion b $20 billion c -$40 billion d -$15 billion 27 Assume that consumer confidence increases. Which of the following is most likely to occur? a An increase in consumer spending will cause AD to shift to the right. b An increase in investment spending will cause AD to shift to the right. c A decrease in consumer spending will cause AD to shift to the left. d A decrease in investment spending will cause AD to shift to the left. 28 Assume that Congress increases taxes. Which of the following is most likely to occur? a An increase in consumer spending will cause AD to shift to the right. b An increase in government spending will cause AD to shift to the right. c A decrease in consumer spending will cause AD to shift to the left. d A decrease in government spending will cause AD to shift to the left.

Study Game - Topic 3.1 - Aggregate Demand, Topic 3.2 - Multipliers

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Study Game - Topic 3.1 - Aggregate Demand, Topic 3.2 - MultipliersOnline version

by Zachary Foust

Define aggregate demand (AD).

Define the wealth effect.

Define the interest rate effect.

Define the foreign purchases effect.

Define consumer confidence.

Define business sentiment.

Define marginal propensity to consume (MPC).

Define marginal propensity to save (MPS).

Define expenditure multiplier.

Define tax multiplier

Assume that homeowners are wealthier after a boom in the housing market. Why would AD shift right?

Assume that Congress increases spending on surface-to-air missiles. Why would AD shift right?

Assume that the dollar depreciates against other currencies. Why would AD shift right?

Assume that the Federal Reserve announces lower interest rates. Why would AD shift right?

Assume that businesses are optimistic about the future state of the economy. Why would AD shift right?

Assume that the stock of available housing is small. Why would AD shift right?

Assume that Congress votes to increase Social Security payments for the elderly. Why would AD shift right?

Assume that households are worried about the future of the economy. Why would AD shift left?

Assume that Congress raises personal income taxes. Why would AD shift left?

Assume that the price level in Mexico decreases relative to the price level in the U.S. Why would AD shift left in the United States?

Assume that the marginal propensity to consume (MPC) is 0.8, and government spending rises by $1 billion. What is the maximum change in real GDP?

Assume that the marginal propensity to consume (MPC) is 0.75, and investment spending rises by $5 billion. What is the maximum change in real GDP?

Assume that the marginal propensity to save (MPS) is 0.1, and government spending rises by $2 billion. What is the maximum change in real GDP?

Assume that the marginal propensity to save (MPS) is 0.25, and consumer spending falls by $10 billion. What is the maximum change in real GDP?

Assume that the MPC is 0.9. If net exports rise by $10 billion and government spending falls by $8 billion, what is the maximum change in real GDP?

Assume that the marginal propensity to consume (MPC) is 0.75, and Congress increases taxes by $5 billion. What is the maximum change in real GDP?

Assume that consumer confidence increases. Which of the following is most likely to occur?

Assume that Congress increases taxes. Which of the following is most likely to occur?