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# ECON 2020 Study Guide - Final Guide: Output Gap, Longrun, Loanable FundsExam

Department
Economics
Course Code
ECON 2020
Professor
Jacob Kirsch
Study Guide
Final

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Murat Iyigun!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Spring 2015
ECON 2020-300: Principles of Macroeconomics
Final Exam--Test B
1. If the marginal propensity to save is 0.3, the size of the multiplier is:
A) 3.3.
B) 2.3.
C) 1.3.
D) 0.7.
Use the following to answer questions 2-3.
Figure: Inflationary and Recessionary Gaps
2. (Figure: Inflationary and Recessionary Gaps) The intersection of AD with SRAS in panel (b)
indicates:
A) a short-run equilibrium.
B) a long-run equilibrium.
C) that the economy needs policies to reduce unemployment.
D) that the economy is at full employment.
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3. (Figure: Inflationary and Recessionary Gaps) Yp in panel (b):
A) is the potential output for this economy.
B) indicates that the economy is experiencing an inflationary gap.
C) indicates that the economy is experiencing a recessionary gap.
D) would be associated with considerable unemployment.
Use the following to answer questions 4-5.
Figure: Shift of the Aggregate Demand Curve
4. (Figure: Shift of the Aggregate Demand Curve) A movement from point C on AD2 to point
A on AD1 may have been the result of:
A) an increase in investment demand due to optimistic GDP forecasts.
B) a decrease in investment due to pessimistic GDP forecasts.
C) decreases in the taxes paid by businesses.
D) lower interest rates.
5. (Figure: Shift of the Aggregate Demand Curve) A movement from point A on AD1 to point
C on AD2 could have resulted from a(n):
A) lower price level.
B) higher price level.
C) increase in the total quantity of consumer goods and services demanded at every price
level.
D) significant decrease in the income level of consumers.
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Use the following to answer questions 6-7.
Figure: Short- and Long-Run Equilibrium
6. (Figure: Short- and Long-Run Equilibrium) Using the accompanying figure, which of the
following would be the appropriate response of the government upon viewing the state of
the economy?
A) Expand aggregate demand by increasing taxes to close the inflationary gap.
B) Reduce aggregate demand by cutting taxes to close the inflationary gap.
C) Expand aggregate demand by cutting taxes to close the recessionary gap.
D) Reduce aggregate demand by increasing taxes to close the recessionary gap.
7. (Figure: Short- and Long-Run Equilibrium) If the economy is at equilibrium at E1, the
government should use __________ fiscal policy to shift the aggregate demand curve to the
________ .
A) expansionary; right
B) expansionary; left
C) contractionary; right
D) contractionary; left
Use the following to answer questions 8-9.
Scenario: Growth Rates in Two Countries
India is growing at a rate of 9% per year, and its real GDP per capita is about \$3,500, while
the United States is growing at a rate of 3% per year, and its real GDP per capita is about
\$47,000.
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