Macroeconomics

‭Chapter 3: Review Questions‬

‭1. What does MPC stand for in economics?‬ ‭A.‬ ‭Monthly Payment Calculation‬ ‭B.‬ ‭Marginal Propensity to Consume‬ ‭C.‬ ‭Maximum Price Ceiling‬ ‭D.‬ ‭Macroeconomic Policy Committee‬ ‭2. In macroeconomics, what does the "long run" refer to?‬ ‭A.‬ ‭A time period of one year‬ ‭B.‬ ‭A time period where resources are underutilized‬ ‭C.‬ ‭A time period where all resources and prices are flexible‬ ‭D.‬ ‭A time period with fluctuations in economic activity‬ ‭3. How is the Marginal Propensity to Save (MPS) calculated?‬

‭A.‬ ‭By dividing the change in savings by the change in income‬ ‭B.‬ ‭By dividing the change in income by the change in savings‬ ‭C.‬ ‭By subtracting savings from income‬ ‭D.‬ ‭By adding savings to income‬ ‭4.‬‭What‬‭is‬‭the‬‭relationship‬‭between‬‭Marginal‬‭Propensity‬‭to‬‭Consume‬‭(MPC)‬‭and‬‭Marginal‬‭Propensity‬ ‭to Save (MPS)?‬

‭A.‬ ‭They are inversely related; as one increases, the other decreases.‬ ‭B.‬ ‭They are directly related; as one increases, the other also increases.‬ ‭C.‬ ‭They have no relationship; they are independent variables.‬ ‭D.‬ ‭They are equal to each other.‬ ‭5. The aggregate supply curve shifts to the right when:‬

‭A.‬ ‭labor supply decreases.‬ ‭B.‬ ‭investment in capital decreases.‬

‭C.‬ ‭corporate taxes decrease.‬ ‭D.‬ ‭natural disasters occur.‬ ‭6.‬ ‭The‬ ‭aggregate‬ ‭demand‬ ‭curve‬ ‭is‬ ‭downward‬ ‭sloping‬ ‭in‬ ‭part‬ ‭because‬ ‭when‬ ‭the‬ ‭price‬ ‭level‬ ‭increases:‬

‭A.‬ ‭the value of cash increases.‬ ‭B.‬ ‭the cost of imports increases relative to exports.‬ ‭C.‬ ‭exports increase.‬ ‭D.‬ ‭the interest rate increases.‬

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