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 1 Paper 2 Paper 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 3” 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

Why self-correction is slow downward

The three fiscal policy lags

The chain after an AD shift

Short-run equilibrium

Why the multiplier is smaller in practice

Balanced budget multiplier

Stagflation

Lags in fiscal policy

What shifts LRAS

Short-run aggregate supply (SRAS)

Why SRAS slopes up

Self-correction from a recessionary gap

Short answer 1. Define or explain: Demand-pull vs cost-push inflation

3 pts

Short answer 2. Define or explain: Long-run aggregate supply (LRAS)

3 pts

Short answer 3. Define or explain: Structural vs cyclical budget balance

3 pts

Short answer 4. Define or explain: Spending multiplier

3 pts

Free response

5 pts

SHORT QUESTION. The table shows the quantities and unit prices of shirts, bread, and pants — the only three goods produced in the country of Middleland — in 2021 and 2022. Assume 2021 is the base year. Shirts Bread Pants Unit prices in 2021 $11 $4 $12 Unit prices in 2022 $10 $5 $15 Quantities produced (both years) 50 70 30 Middleland was in short-run equilibrium in 2022, and POTENTIAL real GDP was $1,150 in 2022. The marginal propensity to consume in Middleland is 0.8.

A. Was the real GDP in 2021 in Middleland greater than, less than, or equal to the nominal GDP in 2021? Explain.

B. Calculate the real GDP in Middleland in 2022. Show your work.

C. Draw (describe) a correctly labeled graph of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for Middleland in 2022, showing (i) the equilibrium real output and price level, labeled Y1 and PL1, and (ii) the full-employment output, labeled YF.

D. Calculate the minimum change and state the direction of change in government spending required to close the output gap in the short run. Show your work.