27 because of changes in the the long run effect of a

27) Because of changes in the ________, the long - run effect of a $10 increase in investment on real GDP
equals ________.
A) interest rate; zero
B) interest rate; $10
C) money wage rate and price level; zero
D) money wage rate and price level; $10
Answer: C
28) The size of the multiplier 29) The multiplier effect is smallest 30) The short - run multiplier is equal to 3, real GDP equals potential GDP of $8,000, and the price
level is equal to 100. Suppose that government expenditure decreases by $200. The long - run
effect of the decrease in government expenditure changes real GDP by
31) After an increase in autonomous spending, in the long run, changes in the price level
A) will make the AE curve steeper.

B) will make the AE curve flatter.
C) will reduce the effect of the multiplier.
D) will not affect the multiplier.
Answer: C
32) In the long run, the multiplier
33) When the economy is at full employment and investment increases, in the long run the price level will
________ and, if potential GDP does not change, in the long run real GDP will ________.
34) A fall in the price level shifts the AE curve ________ and ________ equilibrium expenditure. 35) If the multiplier is 4.0 and investment decreases by $2.5 billion, the AD curve
A) shifts rightward by $10 billion.
B) shifts rightward by less than $10 billion.
C) shifts leftward by $10 billion.
D) shifts leftward by more than $30 billion.
Answer: C
36) The multiplier is 2.5 and the SAS curve is upward sloping. Investment increases by $20 billion. In the
short run, equilibrium real GDP will