Economics –Unit 3 Test Corrections (Almost Done) -{Not Answered: 4,5,9,10,11,15,18,19,21,24,25}

#	Topic	Correct Answer/Why is it Correct?	Why Missed
1.	Aggregate Supply	E= A schedule indicating the level of real output that will be produced at each possible price level A-D are obviously incorrect as they deal with purchasing (D), expenditures (A), inflation and unemployment (C), and inputs (B). Supply indicates production	Not enough studying Never understood Stupid Mistake Did not miss
2.	Aggregate Demand Curve	C= Consumer wealth Energy prices (A) would not effect demand. The prices of inputs (D) would not effect demand. Productivity rates (B) would not effect demand. How much it costs of how quickly a product is made is not going to change how much the product is demanded. What you are left with if either consumer wealth or prices. While a change in prices might effect the demand curve, consumer wealth is what will cause it to shift. The more money the consumer have the more they will purchase, increasing demand	Not enough studying Never understood Stupid Mistake Did not miss
3.	Short-Run Aggregate Supply Curve	C=Prices of inputs decrease The graph set up with real output on the X axis and interest rates on the Y axis. When the prices of inputs decrease we will have in increase in output as we purchase more materials needed for our output, moving the curve to the right.	Not enough studying Never understood Stupid Mistake Did not miss
4.	Aggregate Demand Curve vs. Aggregate Supply Curve	C= Employment increase & Price level has no change	Not enough studying Never understood Stupid Mistake Did not miss
5.	Capital Stock	D=Long-run aggregate supply curve to shift rightward	Not enough studying Never understood Stupid Mistake Did not miss
6.	Inflationary gap	B=Increase in money supply Inflationary gaps can be depleted with the usage of contractionary fiscal policy or minimizing the money supply.	Not enough studying Never understood Stupid Mistake Did not miss
7.	Effect on GDP and Price Level	B= Real GDP increase & Price Level Decrease With an increase in labor GDP would increase since you would now not only be producing more but there would be more individuals with a source on income and that income would then be used for purchases. Price level would decrease because you are now producing more and therefore have an excess supply of the product, so price levels would drop.	Not enough studying Never understood Stupid Mistake Did not miss
8.	Marginal Propensity	A=Consume is 0.8 The problem gives you the information to find the marginal propensity to consume. The equation is: MPC=Change in consumption/change in income x=40/50 x=0.8	Not enough studying Never understood Stupid Mistake Did not miss
9.	Keynesian Aggregate-Expenditure Model	D= $24 billion	Not enough studying Never understood Stupid Mistake Did not miss
10.	Keynesian Aggregate-Expenditure Model	B=The change in real GDP by the initial change in spending	Not enough studying Never understood Stupid Mistake Did not miss
11.	Change in Consumption Schedule	D= An expectation of future shortages of essential consumer goods	Not enough studying Never understood Stupid Mistake Did not miss
12.	Investment Demand Curve	C=Businesses becoming more optimistic with respect to future business conditions The investment demand curve lies on a graph with the Y axis being represented by the rate of return and interest while the X axis is represented by investment. The curve would move to the right along the X axis as investment increases. Investment would increase as a result of 'businesses becoming more optimistic'	Not enough studying Never understood Stupid Mistake Did not miss
13.	Automatic Stabilizers	D=I & II only Congressional action is not included in the list of automatic stabilizers because it requires the action of the government and takes time for any actions discussed by congress to be approved and put to work in the economy. Income tax and unemployment compensation are built into our economy to keep the money supply under control.	Not enough studying Never understood Stupid Mistake Did not miss
14.	Automatic Stabilizers	B= Decrease & Increase Automatic stabilizers really work for the economy during extreme periods such as during recessions and inflationary times. During a recession we need taxes to decrease so not as much money is being taken out of circulation. During inflationary periods we need taxes to increase to get some of the dollars out of the hands of consumer. Depleting the money supply will bring the economy back to equilibrium	Not enough studying Never understood Stupid Mistake Did not miss
15.	Long & Short Run Graph	C= An increase in wages	Not enough studying Never understood Stupid Mistake Did not miss
16.	Short-Run Aggregate Supply	B=Decrease in price level & decrease in unemployment When you have an increase in supply price will drop as there is now excess of a product that needs to be get rid off. Unemployment will also decrease because an increase in supply means that there are more employees are needed to create this increase of produce	Not enough studying Never understood Stupid Mistake Did not miss
17.	Aggregate Supply Curve	A=Increase in price level & increase in real GDP Real GDP would increase because of the excess governmental spending. Price level would decrease because _______	Not enough studying Never understood Stupid Mistake Did not miss
18.	Total Income	E= II & III only	Not enough studying Never understood Stupid Mistake Did not miss
19.	Full-Employment GDP	C= $50 billion	Not enough studying Never understood Stupid Mistake Did not miss
20.	Crowding Out	C=Higher interest rates decrease private sector investment Crowding out is defined as a rise in interest rates and a resulting decrease in planned investment caused by the Federal government's increased borrowing in the money market	Not enough studying Never understood Stupid Mistake Did not miss
21.	Fiscal Policy	B=$25 billion decrease in government & $25 billion increase in taxes spending	Not enough studying Never understood Stupid Mistake Did not miss
22.	Fiscal Policy	D= I & III only During an inflation we want to implement contractionary fiscal policy. Therefore, we want to reduce government spending to help decrease the money supply and to increase income taxes, once again, to get some of the money out of the hands of the consumers	Not enough studying Never understood Stupid Mistake Did not miss
23.	Classical Economics	A=A market economy is self-correcting and thus will not remain in a recession indefinitely Classical, unlike Keynesian, supports a self correcting economy and a government that gives gentle nudges here and there, but over all leaves the economy to straighten itself. Classical economists believe that the economy is self-correcting and won't stay, permanently in a recession and inflation.	Not enough studying Never understood Stupid Mistake Did not miss
24.	Short & Long-Run Supply and Production Possibilities Curves	C=Decrease in S-R Supply, Decrease in L-R Supply, and inward shift in Production Possibilities Curve	Not enough studying Never understood Stupid Mistake Did not miss
25.	Personal Income Taxes	B= II only	Not enough studying Never understood Stupid Mistake Did not miss
26.	Phillips Curve	D=Low unemployment rates When the actual rate of inflation is higher than expected, profits temporarily rise and the unemployment rate temporarily falls	Not enough studying Never understood Stupid Mistake Did not miss
27.	Personal Income Taxes	D=A Decrease in consumption of $67 and an increase in savings of $33 We currently consume two-thirds of what we have available. With the new income tax we have $100 less available for consumption or savings. Therefore there is a decrease in consumption by $67, which is two-thirds of the $100 lost, and a decrease in savings by $33, which is the remain third of the $100.	Not enough studying Never understood Stupid Mistake Did not miss
28.	Personal Income Taxes	A=Decrease in real GDP & decrease in Price level With a rise in incomes taxes we have less money available to consume. Less to consume means a lower GDP. Also with less money available we will not only be consuming less, but also producing less which less lower the price level.	Not enough studying Never understood Stupid Mistake Did not miss
29.	Automatic Stabilizers in Fiscal Policy	D=Go into effect without passage of new legislation Automatic stabilizers are a good thing to have built into the economy since they go into effect almost immediately without any new legislation needed. Should they require a new legislation being passed by congress it would require a great deal of time. The immediate reaction of the built-stabilizers is what gives them a major advantage.	Not enough studying Never understood Stupid Mistake Did not miss
30.	Marginal Propensity to Consume/GDP	D=It could increase by up to $9 billion Equation for finding the marginal propensity to consume: MPC= Change in consumption/change in income. $0.9Billion=$1Billion/x .9x=1 x=1.1111	Not enough studying Never understood Stupid Mistake Did not miss