Macroeconomics Answers

Policymakers who can influence AD cannot offset the adverse effects of a recession due to a fall in AS’. Do you agree with this statement? Explain the answer in words and using an AD-AS diagram.

A shift in the aggregate expenditure curve from A1 to A2 is caused by

I.A redistribution from poor to the rich
ii.Expectations of higher income
iii.Expectations of lower future inflation
iv.A decrease in the marginal propensity to save

If 75% of any increase in income is spent on consumption, then increases in autonomous investment of R1 billion results in an increase in national income of as much as :

I.R4 billion
ii.R1.33 billion
iii.R6 billion
iv R5 billion

Based on Aggregate expenditure model an increase in slope of the Aggregate expenditure function will cause AE to become

I.Steeper and a given change in autonomous consumption C0 to have a smaller effect on output
ii.Steeper and a given Change in autonomous consumption to have a larger effect on output
iii.Flatter and a given change in autonomous consumption to have a smaller effect on output
iv.,Flatter and a given change in autonomous consumption to have a larger effect on output

suppose that an economy is undergoing a recession because of a fall in AD using an aggregate demand aggregate supply (AD-AS) diagram, depict the situation of the economy and (b) if policy makers take no action, how will the economy evolve over time? explain your answer using an AD-AS diagram

In the aggregate expenditure model for a closed economy, assuming investment, government spending and taxes are exogenous,if the marginal propensity to consume is 0.8 , simultaneou 50 unit increase in government spending and a 20 unit decrease in investment will change equilibrium income by



i.87.5 units
ii.350 units
iii.500 units
iv.150 units