1. If Aggregate Expenditures are too high at the full-employment GDP, we wouldhave a

• a) a stagflationary expenditure gap

• b) an employment expenditure gap

• c) a recessionary expenditure gap

• d) an inflationary expenditure gap

• e) a budgetary expenditure gap

2. If we assume that the MPC is 0.75 and investment spending rises by $50 billion. How much will real GDP change?

• a) $25 billion

• b) $75 billion

• c) $100 billion

• d) $175 billion

• e) $200 billion

3. If income in Europe decreases, US

a) income would decrease

b) exports would decrease

c) unemployment would increase

d) all of the above

e) none of the above

4. If total expenditures are less than what is needed to achieve full-employment then Keynes would suggest

• a) raise taxes or raise government spending

• b) lower taxes or lower government spending

• c) lower interest rates or raise taxes

• d) raise taxes or raise interest rates

• e) lower taxes or raise government spending

5. Which of these would shift the Aggregate supply curve to the left (decrease)

a) improved technology

b) more education

c) increased immigration

d) lower sales taxes

e) higher prices of imported goods

6. Cost-push inflation is worse than demand-pull inflation because with cost-push inflation we get higher prices and

a) real output declines

b) wages rise

c) imports decrease

d) taxes rise