ECON Final 231

Fiscal policy refers to the:

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level

The American Recovery and Reinvestment Act of 2009 was implemented primarily to:

stimulate aggregate demand and employment.

Which of the following represents the most expansionary fiscal policy?

$10 billion increase in government spending

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the above information. The level of productivity is:

2

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Amount of real Price level Amount of real Output demanded Index Output Supplied $200. 300. $500 300. 250. 450 400. 200. 400 500. 150. 300 600. 100. 200 Refer to the above data. The equilibrium price level will be:

200

Menu costs:

are the costs to firms of changing prices and communicating them to customers.

The public debt is held as:

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds

The amount by which government expenditures exceed revenues during a particular year is the:

budget deficit

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is:

$275 billion.

What percentage of the average U.S. firm's costs are accounted for by wages and salaries?

75

An appropriate fiscal policy for a severe recession is

a decrease in tax rates

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy Amount of real Price level Amount of real Output demanded Index Output Supplied $200. 300. $500 300. 250. 450 400. 200. 400 500. 150. 300 600. 100. 200 Refer to the above data. If the price level is 250 and producers supply $450 of real output:

a surplus of real output of $150 will occur

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

determinants of aggregate demand.

The American Recovery and Reinvestment Act of 2009:

implemented a $787 billion package of tax cuts and government expenditure increases.

The determinants of aggregate supply:

include resource prices and resource productivity

Since 2002, the United States has had:

large Federal budget deficits

A contractionary fiscal policy is shown as a:

leftward shift in the economy's aggregate demand curve

Graphically, cost-push inflation is shown as a:

leftward shift of AS curve

Which of the following would most likely shift the aggregate demand curve to the right?

An increase in stock prices that increases consumer wealth.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. The budget deficit in year 3 is: Select one:

$100 billion.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. The per unit cost of production in the economy described above is:

$2

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is:

3.9 percent.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. A budget surplus occurred in year:

6

The group of three economists appointed by the President to provide fiscal policy recommendations is the:

Council of Economic Advisers.

An appropriate fiscal policy for severe demand-pull inflation is:

a tax rate increase.

The amount by which Federal tax revenues exceed Federal government expenditures during a particular year is the:

budget surplus.

The aggregate demand curve is:

downsloping because of the interest-rate, real-balances, and foreign purchases effects

Discretionary fiscal policy is so named because it:

involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.

The economy's long-run aggregate supply curve:

is vertical

The political business cycle refers to the possibility that:

politicians will manipulate the economy to enhance their chances of being reelected.

Productivity measures:

real output per unit of input

A major advantage of the built-in or automatic stabilizers is that they:

require no legislative action by Congress to be made effective.

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along an upsloping AS curve.

Other things equal, an improvement in productivity will:

shift the aggregate supply curve to the right

The aggregate demand curve:

shows the amount of real output that will be purchased at each possible price level.

The aggregate supply curve (short-run):

slopes upward and to the right.

The public debt is the amount of money that:

the Federal government owes to holders of U.S. securities

Per-unit production cost is:

total input cost divided by units of output