Answer the following questions by using the graphs given above.

1. The horizontal distance denoted by fg represents

1. The increase in real national income if the price level varies

2. The increase in aggregate demand due to an increase in autonomous expenditures

3. The macroeconomic equilibrium constant with SRAS0

4. The value of simple multiplier

2. Assume input prices do not change. The new short – run macroeconomic equilibrium

as a result of the increase in autonomous expenditure will be

1. At point f, where the autonomous expenditure is completely offset

2. At point i, with real output of 800 and a price level of 2.0

3. At point g, with real output of 1,000 and a price level of 2.0

4. At point h, with real output of 800 and a price level of 2.6

3. Assume that AE curve shifts upward from AE0 to AE1 but the price level remains constant at its initial level, we can say that,

1. autonomous expenditures must have increased by 250

2. equilibrium real national income increases by 500

3. the AD curve shifts to the right, Y’ = 1,000 at the price level 2 and an excess demand for goods emerges

4. all of the above are correct

4. What is the value of the multiplier?

1. 5.0

2. 0.5

3. 2.0

4. 4.0

5. The movement from point g to h implies

1. The AE1 curve shifts downward to intersect the 450 line at an output 800, as at point c

2. The AE1 curve shifts downward to intersect the 450 line at an output 500, as at point a

3. The economy moves along the AE1 curve until it reaches an output of 800, as at point c

4. The economy moves along the AE0 curve until it reaches an output of 800, as at point e