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Macroeconomic Equilibrium and Multipliers Online Quiz Questions

Use this free practice quiz with 20 questions to review Macroeconomic Equilibrium and Multipliers, test your knowledge, and prepare for your next test or exam.

20 questions
01
True or false
1 point

True or false: In the AD–AS model, short-run macroeconomic equilibrium occurs where the AD curve intersects the SRAS curve.

  1. A

    True

  2. B

    False

02
Choose one
1 point

Households become less confident and reduce consumption. What is the most likely short-run effect?

  1. A

    Real GDP rises, and the price level rises.

  2. B

    Real GDP falls, and cyclical unemployment rises.

  3. C

    Real GDP remains unchanged, and cyclical unemployment falls.

  4. D

    The price level rises, while real GDP remains unchanged.

03
Fill in the blank
1 point

Complete the relationship between the marginal propensities to consume and save: MPC + MPS = .

04
Written response
1 point

In a simple economy with no taxes or international trade, MPC = 0.80. What is the spending multiplier?

05
Choose all
1 point

Select all conditions that are usually associated with a recessionary gap.

  1. A

    Equilibrium real GDP is below potential GDP.

  2. B

    Factories and other resources are underused.

  3. C

    Strong demand for labor creates rising wages and production costs.

  4. D

    Cyclical unemployment is elevated.

06
True or false
1 point

True or false: When the economy produces at potential GDP, every person who wants a job must be employed.

  1. A

    True

  2. B

    False

07
Written response
1 point

What is the standard name of the model in which equilibrium occurs where planned aggregate expenditure intersects the 45-degree line?

08
Choose one
1 point

In the expenditure-output model, planned expenditure is greater than current output. What adjustment do firms make?

  1. A

    Inventories rise unexpectedly, so firms reduce production.

  2. B

    Inventories fall unexpectedly, so firms increase production.

  3. C

    The price level immediately falls, so firms increase production.

  4. D

    Imports automatically rise until planned expenditure equals output.

09
Written response
1 point

In the simplest model, MPC = 0.75. What is the tax multiplier?

10
Choose all
1 point

Select all of the following that the material identifies as leakages that reduce the spending multiplier.

  1. A

    Saving

  2. B

    Taxes

  3. C

    Imports

  4. D

    Autonomous consumption

11
Choose one
1 point

Compared with a steep SRAS curve, what is the likely short-run effect of a rightward shift in AD when SRAS is flatter?

  1. A

    Real GDP does not change, because only the price level responds.

  2. B

    The price level rises more while real GDP rises more.

  3. C

    Real GDP rises more while the price level rises less.

  4. D

    Both real GDP and the price level must fall.

12
Open ended
1 point

Explain why the balanced-budget multiplier equals 1 in the simplest model. Include the effect of equal increases in government purchases and taxes on equilibrium real GDP and explain why the two policy changes have different initial effects on aggregate expenditure.

13
Choose one
1 point

Over time, which adjustment is most consistent with an economy recovering from a recessionary gap without an additional demand stimulus?

  1. A

    SRAS shifts rightward as wages and input costs face downward pressure.

  2. B

    SRAS shifts leftward because labor shortages raise wages.

  3. C

    LRAS shifts leftward immediately because the price level falls.

  4. D

    AD shifts leftward because potential GDP rises.

14
True or false
1 point

True or false: In the simplest model, the tax multiplier has a smaller absolute value than the government spending multiplier because households save part of a tax cut.

  1. A

    True

  2. B

    False

15
Choose one
1 point

Households become less confident and reduce consumption. What is the most likely short-run effect on the AD–AS equilibrium?

  1. A

    Real GDP rises and the price level rises

  2. B

    Real GDP falls and the price level generally falls or rises less quickly

  3. C

    Real GDP falls while the price level must rise

  4. D

    Real GDP and the price level remain unchanged

16
Choose one
1 point

Which statement best describes potential GDP?

  1. A

    The maximum possible output with every person employed

  2. B

    The economy's output when the price level is constant

  3. C

    The sustainable full-employment level of real GDP, with some normal unemployment remaining

  4. D

    The level of nominal GDP measured before inflation is removed

17
Choose one
1 point

In the expenditure-output model, planned aggregate expenditure is greater than current real GDP. What adjustment is most likely to occur?

  1. A

    Firms increase production because inventories fall unexpectedly

  2. B

    Firms reduce production because inventories rise unexpectedly

  3. C

    The price level immediately falls to restore equilibrium

  4. D

    The government automatically increases purchases

18
Choose one
1 point

If the marginal propensity to consume is 0.65, which statement correctly describes the marginal propensity to save and the associated behavior?

  1. A

    0.35

  2. B

    0.65

  3. C

    1.00

  4. D

    0.35 saved and 0.65 consumed

19
Written response
1 point

In a simple economy with no taxes or international trade, MPC is 0.75 and autonomous investment increases by 15 billion dollars. Assuming a fixed price level, what is the change in equilibrium real GDP? Enter the number in billions of dollars. The absolute tolerance is 0 billion dollars.

20
Fill in the blank
1 point

Suppose actual equilibrium real GDP is $950 billion and potential GDP is $1,000 billion. Using output gap = actual real GDP − potential GDP, the dollar output gap is billion, and the output gap percentage relative to potential GDP is %.