Suppose an adverse weather event moves the economy into a recession at point B in the following picture. Which of the following would be true.

If the marginal propensity to consume is 3/4, then the marginal propensity to save is 4/3.

The US entered World War II in 1941. The impact this had on the US economy is consistent with what would be predicted by the aggregate demand and aggregate supply model. 

Consider an economy in recession. Suppose that the government chooses to do nothing to try to get the economy out of the recession. The recession will still end as firms adjust their expectations about the future price level. 

Economists refer to fluctuations in output as the “business cycle” because movements in output are regular and predictable.

One of the key facts about recessions is that real GDP and unemployment tend to move in opposite directions. 

Consider the following aggregate demand and aggregate supply picture. Suppose the economy starts at point C. An increase in the money supply would move the economy to which point in the short-run? 

Consider the following picture of the money market (this is the model of liquidity preference).  There is excess money demand at an interest rate of 

One of the most interesting facts about recessions in the US economy is that they almost always last the same amount of time. 

In the discussion of why the Aggregate Demand, we discussed three reasons the AD curve slopes downward: the wealth effect, the interest rate effect, and the net export effect. Which of the following describes the wealth effect?