Unit 3: National Income & Price Determination
Macro · Unit 3 · Paper 2

National Income & Price Determination unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 47 terms and is the same for everyone, so a teacher can assign “Unit 3, Paper 2” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 32 min 29 points0/17 attempted
1

Structural vs cyclical budget balance

2

The AD–AS rubric checklist

3

Shifters of AD

4

Policy versus self-correction, same output

5

Why the multiplier is smaller in practice

6

Tax multiplier

7

The same-way / opposite-way test

8

Demand-pull vs cost-push inflation

9

Short-run aggregate supply (SRAS)

10

Why a deficit widens with no policy change

11

Fiscal policy

12

The three fiscal policy lags

Short answer 1. Define or explain: Long-run aggregate supply (LRAS)

3 pts

Short answer 2. Define or explain: Why AD slopes down is NOT substitution

3 pts

Short answer 3. Define or explain: Short-run equilibrium

3 pts

Short answer 4. Define or explain: Using a multiplier on the exam

3 pts

Free response

5 pts

The economy of Calder is operating with a recessionary gap of $500 billion. The marginal propensity to consume in Calder is 0.8. Assume no crowding out for parts A through C.

A. Calculate the spending (expenditure) multiplier.

B. Calculate the minimum increase in government spending required to eliminate the recessionary gap.

C. Calculate the minimum tax cut required to eliminate the recessionary gap. Show your work.

D. Indicate the effect of the policy in part B on Calder’s government budget balance.

E. Describe precisely what a correctly labeled graph of the loanable funds market in Calder would show as a result of the policy in part B, including the effect on the real interest rate.