EXAM

Which category is an example of discretionary spending?

hurricane relief funds

The largest source of federal government revenues is _____ taxes.

individual income

Which measure is NOT a channel through which the government can influence aggregate demand?

regulation on businesses

The curve that shows how much GDP is demanded at various price levels is called

aggregate demand.

If the economy is at full employment, increases in government spending

are primarily absorbed by price increases.

Measuring changes in a fixed basket of goods to assess changes in price is a _____ method.

cost-of-goods index

The collapse of home values in 2008 led to a(n) _____ in Americans' consumption and a(n) _____ in their saving rates.

decrease; increase

According to the Laffer curve, higher tax rates can lead to lower tax revenues due to

disincentives to work and invest.

The aggregate demand curve slopes _____ and has _____ on the vertical axis.

downward; the price level

Which industry today arguably faces the most stringent and costly regulations?

drugs

The principal measure of inflation in the United States is

the consumer price index.

If the inflation rate decreases from 5% to 3%, the economy is undergoing

disinflation.

What is real GDP in 2010 dollars if nominal GDP in 2014 is $15,000 billion; the GDP deflator in 2014 is 110; and the GDP deflator in 2010 was 100?

$13,636 billion

Who recognized the need to develop tools to analyze the macroeconomy as a whole?

John Maynard Keynes

Whose analysis serves as the foundation of modern macroeconomics?

John Maynard Keynes

_____ government spending, _____ transfer payments, and _____ taxes are all examples of contractionary fiscal policy.

Reducing; reducing; raising

When the economy moves from point a to point b as a result of the LRAS and SRAS curves shifting to the right, how would one describe the new economic conditions?

The economy is growing, and inflationary pressures are decreasing.

If business expectations become less favorable, what will likely happen to the AD curve?

AD shifts left.

When the aggregate price level of an economy rises, what generally happens, according to the interest rate effect?

Interest rates rise and investment falls.

Which event causes an increase in aggregate demand?

falling interest rates

The National Bureau of Economic Research

is a nonprofit research organization that dates business cycles in the United States.

A stronger dollar will shift the U.S. aggregate demand curve to the _____ and _____ output demanded.

left; decrease

Transfer payments are

monies paid directly to individuals by the government.

The formula for converting the current dollar value to the constant dollar value is

nominal × (base year index / current year index).

Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.

right; increase

An increase in consumer confidence in a country will result in a

shift of the aggregate demand curve to the right.

Increased government _____ lead(s) to a larger increase in GDP when compared to the same reduction in _____.

spending; taxes

Which event has significantly influenced the development of macroeconomic ideas?

the Great Depression

Suppose an economy has historically grown at a rate of 2.25%. The economy is currently growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

expansion

_____ is a measure of the changes in the average prices received by domestic producers for their output.

The producer price index