ch 11

The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. The change in government spending ___________ the equilibrium level of real output by_________ billion .

40 . 50 increases . 10

Which of the following are examples of automatic stabilizers? Check all that apply.

As corporate profits rise during an economic expansion, corporate income tax revenues rise. As people earn higher incomes during an expansion, the progressive tax system requires them to pay higher average tax rates.

Which of the following could cause an increase in the budget deficit? Check all that apply. True or False: Keynesian economists argue that economies recover quickly from recessions on their own and, therefore, no government interventions is needed. Keynesian theory stresses the importance of ____________ to offset fluctuations in __________

Expansionary fiscal policy An economic recession false countercyclical policy aggregate demand

The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (SRAS), and long-run aggregate supply curve (LRAS) for the U.S. economy in May 2020. Suppose the government decides to intervene to bring the economy back to its potential output. In this case, the government would engage in ______________ policy. Suppose that in May the government undertakes the type of policy required to bring the economy back to potential output given in the previous scenario. In September 2020, consumer confidence increases, leading to an increase in consumer spending. Because of the _______________ associated with implementing fiscal policy, the impact of the government's new policy will likely ______________ once the effects of the policy are fully realized.

an expansionary lags push the economy beyond potential output

A hail storm that breaks lots of windows in buildings is

bad for the economy because wealth was destroyed and more spending on repairs will result in less spending on other goods and services.

The following graph shows a hypothetical economy that uses the dollar as its currency. The economy is in short-run equilibrium at an output level of 300 billion and a price level of 60. Suppose that the economy's potential output is $500 billion. Use the purple line (diamond symbols) to plot the long-run aggregate supply (LRAS) curve on the graph. The economy's expenditure multiplier is _____________, which means that the government must alter its expenditures by _______________ to restore output to potential output.

below expansionary 5 40

If the government levies $5 billion in taxes to finance spending on the reconstruction of assets damaged as the result of a severe hurricane, the net impact on total employment will be

small because the higher taxes will reduce spending in other areas, which will tend to offset any jobs created by the government spending.