Final exam prep for ECON1

Which statement is the most accurate explanation of the expenditure multiplier?

When the aggregate expenditure changes, GDP changes.

The aggregate demand represents total spending on ________.

a nation's domestic output of goods and services

During an recessionary gap due to overly sufficient aggregate demand, the government should ________ spending by an amount determined by the spending multiplier in an attempt to return the economy to potential GDP/full employment. decrease stay the same increase

increase

Aggregate Demand (AD) is defined as C + I + G + (X-M). I refers to ________.

investment spending

Which of the lines represents the C + I stacked functions? Correct! line 2 line 3 line 1

line 2 （下から2番目）

The definition of ________ is the ease with which an asset can be used to buy a service or a good. exchange rate liquidity money supply

liquidity

A decision by the Federal Reserve to change reserve requirements for banks is an example of: fiscal policy. monetary policy. federal budget policy.

monetary policy.

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called

potential GDP.

The level of government spending is determinded by political factors, not by the level of __________in a given year

real GDP

As interest rates rise, the effect on aggregate demand is to

reduce consumer borrowing and consumption spending.

How would automatic stabilizer programs, such as unemployment benefits, be affected by a balanced budget amendments? Correct! 1) They would lose flexibility because spending could not increase unless funds were there. 2) They could no longer exist because the government would not have a way to pay for these programs. 3) They would increase in flexibility because they could kick in before Congress has time to adjust the budget.

1) They would lose flexibility because spending could not increase unless funds were there.

If the economy is producing more than its potential GDP, ________ will show a larger deficit than the actual deficit. 1) the standardized employment deficit 2) the automatic stabilizers 3) discretionary fiscal policy 4) expansionary fiscal policy

1) the standardized employment deficit

Given the table above, what is the price index for 2013, with 2012 as the base year having a price index of 100 (round your answer to the nearest whole number). Items Quantity in Basket 2012 Price 2013 Price Coffee 8 $4.00 $4.50 Tea 4 $2.00 $2.25 Soda 6 $1.25 $1.50

114 (4*8 +2*4+1.25*6 / 4.5*8+2.25*4+1.5 X 100)

According to the graph, which of the following statements is accurate? 1) A smaller increase in equilibrium outputs is created with an increase in AE0 to AE1. 2) A new equilibrium is created with an increase in AE0 to AE1.

2) A new equilibrium is created with an increase in AE0 to AE1.

What is the one area in which both Neoclassical and Keynes economic perspectives agree when it comes to the macroeconomy? 1) Prices and wages are flexible. 2) Aggregate demand is a useful tool for controlling inflation.

2) Aggregate demand is a useful tool for controlling inflation.

Looking at a list of where tax revenue is being used for funding, it includes libraries, parks, police and fire protection, hospitals and roads. From this list, it can be accurately concluded that the funding entity for these services is 1) from foreign and a state government. 2) a State government. 3) the Federal government.

2) a State government.

To find macro equilibrium in a table, the numbers for ________ and ________ should equal each other. 1)Keynesian Cross; taxes 2) aggregate expenditure; GDP/national income 3) exports; imports

2) aggregate expenditure; GDP national income

A central bank that wants to increase the quantity of money in the economy will 1) sell bonds in open market operations. 2) buy bonds in open market operations. 3) raise the discount rate.

2) buy bonds in open market operations.

Bank supervision consists mostly of 1) adjusting reserve requirements, setting bank liability requirements, and monitoring risky investments. 2) setting minimum reserve requirements, ensuring bank net worth remains positive, and setting restrictions on investments. 3) setting maximum reserve requirements, setting bank capital requirements, and setting restrictions on types of loans a bank can make.

2) setting minimum reserve requirements, ensuring bank net worth remains positive, and setting restrictions on investments. -monitoring and on-site examinations -fill reports with bank, regulators, which includes details of a bank's income. assets and liabilities.

An increase in the Marginal Propensity to Consume (MPC) ________ the consumption function. 1) flattens 2) steepens 3) does not affect

2) steepens

Entering January 2000, the price index for a basket of consumer goods was standardized at 100. This price index increased to 103.4 in January 2001, 106.2 in 2002, 108.5 in 2003, and 110.2 in 2004. Calculate the inflation rates in 2000, 2001, 2002, and 2003.

200:3.4 % 2001:6.2% ( 106.2/103.4)*100 =6.2% 2002:8.5% 2003:10.2%

According to the Keynesian perspective, reasons for an increase in aggregate demand include 1)decrease in foreign demand for net exports. 2)relative price increase of U.S. goods. 3)increase in foreign demand for net exports.

3)increase in foreign demand for net exports.

Considering the Keynesian Cross Diagram, the income=expenditure line is also called the ________. macroeconomic equilibrium potential GDP line 45-degree line

45-degree line

Based on what you know about how the price index is constructed, which of the following price increases will lead to the largest increase in the price index?

A housing shortage cause rent price to increase by 10% in single year.

All things being equal, which event will shift the aggregate demand (AD) curve to the right?

A increase in net exports

When an economy's output increases and the price level increases, the ________ curve has shifted to the ________.

AD Right

Where is the macro equilibrium found in the income-expenditure model graphically? At the level of GDP where AD equals AS. At the market level where demand equals supply. At the level of GDP where national income equals aggregate expenditure.

At the level of GDP where national income equals aggregate expenditure.

If an economy has aggregate price levels that are increasing, but the wage rate stays the same because of downward wage stickiness, what would be the economic consequences?

Business would fire some employees as labor becomes too expensive and the quantity of real GDP supplied would decrease.

Which of the following formulations correctly equates aggregate expenditure? C + I + G + import spending C + I + G + (X-M) C + I + G + gross exports

C + I + G + (X-M)

Aggregate Expenditure

C+I+G+(X-M)

Chapter 10

Chapter 10

Chapter 11

Chapter 11

If the government saw that consumer confidence was low, what step can it take to shift the AD to the right?

Congress can pass tax cuts.

David's pay last year was $100,000. His pay this year increased to $115,000. The consumer price index increased from 100 to 115 over the same time period. What has happened to David's real income from last year to this year?

David's real income is unchanged.

The development of a nationwide computerized job bank listing of all job openingswould be most likely to reduce:

Friction unemployment

Among all high-income countries, which consistently has the lowest long-run unemployment rate in the past 30 years?

Japan

1. Explain briefly what the consumer price index is trying to measure and how it is constructed.

The consumer price index tries to measure the overall cost of the goods and services bought by a typical consumer. It is constructed by surveying consumers to fix a basket of goods and services that the typical consumer buys, finding the prices of the goods and services over time, computing the cost of the basket at different times, and then choosing a base year. To compute the price index, we divide the cost of the market basket in the current year by the cost of the market basket in the base year and multiply by 100.

Consider the following schedule to find where the equilibrium occur. Where does real GDP supplied and equilibrium price level occur? Current Price Level /Real GDP-quantity demanded per trillion /Real GDP-quantity supplied per trillion 785 20.0 13.0 610 17.8 17.8 500 15.5 19.0 478 12.0 21.7

The equilibrium point occurs at a price level of 610 and an output level of 17.8

Considering the figure above, at what point does the equilibrium occur?

The equilibrium point occurs at a price level of 83 and an output level of 7. this is where AD and AD are intersected

Which of the following will cause the aggregate demand curve to have a downward slope?

The foreign price effect.

Which of the below is true about investment as function of national income? -There is a relationship between GDP and the investment function. -The investment function can be drawn as a horizontal line. -The slope of the investment function is one.

The investment function can be drawn as a horizontal line.

Of the following statements about investment, which is true when it comes to explaining its function with regards to national income? The investment function on a graph is drawn as a horizontal line. There is a relationship between the investment function and the GDP. The investment function has a slope of one.

The investment function on a graph is drawn as a horizontal line.

Aggregate demand curves slope downwards for each of the following reasons EXCEPT

The money rate effect

When the central bank decides it will buy bonds using open market operations the money supply increases. the money supply decreases. interest rates decrease.

The money supply increase

SRAS

This reflects the possible expansion path for the economy if the overall level of output increases temporarily. ( horizontal

All over the globe commodities (e.g. corn, wheat, beans) are priced in United States dollars. This in economic terms, is an example of Flexible values units of account Store of value

Units of account

The long-run aggregate supply curve (LRAS) is ________ on a graph.

Vertical

The unemployment rate in a town in which 65,400 persons are employed and 11,000are unemployed equals:

14.4%

What are the components included in aggregate demand? 1) Production, investment, private spending, and net imports 2) Consumption, investment, government spending, and net exports.

2) Consumption, investment, government spending, and net exports.

Your friend asks what you are studying and you tell them neoclassical policies in a macroeconomy. Which of the following statements would explain neoclassical economic policy the best to your friend? 1) Neoclassical policies would call for government intervention during a recession. 2) Neoclassical policies would call for no government intervention during a recession. 3) Neoclassical policies would call for limited government intervention during a recession.

2) Neoclassical policies would call for no government intervention during a recession.

Which one of the following statements best represents the Keynesian Perspective? 1) Build it and they will come. 2) People's demand determines what is built. 3) Build things so long as the supply is there.

2) People's demand determines what is built.

An example of a progressive tax would be 1) the Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn. 2) an income tax with a 10% tax rate on low-income households and 20-30% tax rates on higher-income households. 3) a Social Security tax rate of 5% on earned income below $100,000 and 0% on income earned above $100,000.

2) an income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

A supply side policy to address a recession would likely 1) enact policies that stimulate aggregate demand rather than aggregate supply. 2) provide tax cuts rather than increased government spending. 3) increase government spending rather than provide tax cuts.

2) provide tax cuts rather than increased government spending.

Most spending on K-12, college, and universities is provided by: 1) federal spending. 2) federal, state, and local spending equally. 3) state and local spending.

3) state and local spending.

If the unemployment rate is 6 percent and the number of persons unemployed is 6million, then the number of people employed is equal to:

94 million

The President is concerned that a recent financial crisis will increase the natural rate of unemployment. After three full quarters of negative economic growth the unemployment rate now stands at 10%, and she fears it will persist at this level indefinitely. As the President's economic advisor, which possible reply to the President's concerns most agrees with natural unemployment rate theory?

All else being equal, the clinical unemployment brought about by the recession will not effect the natural unemployment rate

Chapter 12 and 13

Chapter 12 and 13

Chapter 7

Chapter 7

Chapter 8

Chapter 8

Chapter 9

Chapter 9

Bill is a construction worker who was laid off because the market for new homes was adversely affected in the recession. Bill's unemployment experience is referred to as

Cyclical unemployment.

A critical function of the private banking system is ________? Establishing the links between savers and borrowers. Minimizing risks for investors. Keeping transactions records to assist the government in collecting taxes.

Establishing the links between savers and borrowers.

In the labor market diagram, the demand (downward-sloping) curve represents ________.

Firm demand for labor

________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.

Full employment GDP

Which of the following is a commonly cited explanation for the relatively high level of natural unemployment in European countries compared to the United States?

General unemployment benefits.

Increase the sophistication of the financial payments system benefits banks mostly because

Household will need to hold less of the wealth in the form of cash ans will be able to leave more in banks from where it can be loaned our for a profits.

Which of the following is included in the core inflation index calculation?

Housing price

While Japan has enjoyed a persistent low unemployment rate compared to other high-income countries, this may paint too rosy a picture of unemployment in Japan because

Japanese employers are reluctant to formally lay off workers even when there is little real work.

Debit cards are a form of credit. money. debt.

Money

The money multiplier defines the amount of -money that the banking system can create. -money that a bank can create. -consumer demand following an increase in government spending.

Money that the banking can create

What accurately describes the AD-AS model?

Price level is shown on the vertical axis and real GDP is shown on the horizontal axis.

Which of the following is the name used to describe the price index that consists of raw materials and intermediate goods?

Producer Price Index

When the economy is at full employment, what is the relationship between real GDP and real potential GDP?

Real GDP is equal to real potential GDP.

Which of the following statements is true concerning real GDP in the long run?

Real GDP will equal potential GDP regardless of the price level.

Because it ______time to find jobs, frictional unemployment occurs because it is a world of imperfect information.

Takes

In the early 2000s and flat screen TVs were introduced into the market. By the 2010s flat screens were flatter and less expensive. The technology changed quickly over just a few decades and improved consumers TV and entertainment experience. In regards to this technological improvement, how has the CPI calculation been biased?

The CPI has overstated the cost of living because of quality improvement bias.

Which of the following is a commonly cited reason for a decrease in the unemployment rate between the 1980s and today?

The aging baby boomer population reaching middle age.

Consider the following schedule. If the potential GDP is at 12.0, what can you conclude about price levels and the unemployment rate? Current Price Level Real GDP-quantity demanded per trillion Real GDP-quantity supplied per trillion 120 17.0 8.0 115 15.0 15.0 110 13.0 12.0 100 10.0 11.2

The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP.

If real GDP is less than potential GDP then

The unemployment rate is high and price levels are stable. (The actual unemployment rate is greater than the natural unemployment rate)

The short run aggregate supply (SRAS) curve is a(n) ________ curve due to sticky wages and the long run aggregate supply (LRAS) curve is a(n) ________ curve due to the flexibility and a balance between wages and prices.

Upwardly Sloping ( Positive relationship between the price level and real GDP/quantity of output) Vertical LRAS is ( horizontal because real GDP/quantity of output is independent of price levels)

Equilibrium occurs in the macroeconomy with the income-expenditure model where national income and aggregate expenditure are equal. Where does this equilibrium occur? Where the aggregate expenditure schedule crosses the real GDP (Y) line. Where the aggregate expenditure schedule crosses the 45-degree line. Where the aggregate expenditure schedule crosse

Where the aggregate expenditure schedule crosses the 45-degree line.

a) name the government bureau responsible for unemployment data and the employment categories its uses in doing so, and b) describe the history of the unemployment rate since 1890.

a) Labor's Bureau of Labor Statisticsb) -spiked in Panic of 1893-spiked (highest) in the Great Depression (1930s)-went back down (lowest) after the Great Depression during WWII (1940-1945)-gradually climbed from ~2%-~10% from 1945-1980-gradually fell and then rose again up until 2015

In the long run, real GDP will

be close to or at its potential GDP.

Cyclical unemployment arises when:

business activity in the macroeconomy declines.

Components of aggregate demand include all of the following EXCEPT

firms' demand for inputs.

The Federal Reserve's monetary policy tools include all the following EXCEPT varying the discount rate. setting reserve requirements. printing money.

printing money.

Keynes argued that the ________ was unable to keep the economy at full employment. As a result, ________ should take an active role in managing the economy.

private sector government

structural unemployment:

unemployment that occurs because individuals lack skills valued by employers

In a small country, the macro economy in its base year was a nominal GDP of $600M. In a later year, the general level of all prices was two and a half times as high, and nominal GDP reached $1500M. Between the base year and the later year:

there was inflation.

A flat tax 1) imposes a regressive tax decreases with income. 2) is a progressive tax. 3) imposes a single, identical tax rate on the income of all taxpayers.

3) imposes a single, identical tax rate on the income of all taxpayers.

What is inflation and how does it differ from deflation. How do we measure the inflation rate?

Inflation is nothign but an increase in the demand which can't be fulfilled by the supply. Deflation on the other hand is a fall in the demand to an extent that the price is very low in the market. We measure the inflation by price index like CPI.

What might shift aggregate demand?

Loss of business confidence. ( AD to the left) An increase gov spending m a cut in taxes leading consumer spending ( AD to the right )

Imagine the economy is defined by the consumption function of C = 140 + 0.9 (Yd) where 140 is autonomous consumption, 0.9 is marginal propensity to consume, and Yd is disposable income (after taxes) and Yd=Y-T, where Y is national income (or GDP) and T=Tax Revenues=0.3Y (0.3 is the avg. income tax rate). To find the macro equilibrium use the following equation Y = C + I + G + (X - M). Where C=140 + 0.9(Yd), I=400, G=800, X=600, M=0.15Y. What is the aggregate expenditure for this economy? [Remember Y=AE] Y = 4042 Y = 3079 Y = 3730

Y = 3730

Looking at the figure above, the reason why the consumption function line does not start at zero is due to ________. marginal propensity to consume autonomous consumption marginal propensity to save

autonomous consumption

Some critics of the unemployment rate say that it under-reports the actual unemployment problem by:

considering discouraged workers to be out of the labor force.

Loan defaults are when ________. customers do not repay their loans customers pay back their loans early customers pay back their loans

customers do not repay their loans

Which of the following would cause a negative demand shock (shift to the left) in aggregate demand?

decreased availability of business capital

If real GDP is not close to potential GDP then ________ and if real GDP is close to or at potential GDP then ________.

equilibrium occurs in the flat range of AS; equilibrium occurs in the steep range of AS

If the aggregate demand (AD)-aggregate supply (AS) model are equal

equilibrium occurs.

Aggregate Demand (AD) is defined as C + I + G + (X-M). X refers to ________.

export expenditure

What is money called if it has no significant non-monetary value? Fiat money commodity money intrinsic value money

fiat money

Automatic stabilizers during a recession include Social Security payments. food stamps. property tax rates.

food stamps. unemployment insurance personal and corporate income tax

Which of the following concepts describes an economy producing at its potential and unemployment at the natural rate of unemployment? 次の概念の中で、自然失業率で潜在成長率と失業率を生み出す経済について説明する概念はどれですか。

full employment GDP

Aggregate Demand (AD) is defined as C + I + G + (X-M). G refers to ________.

government spending

Which of the following would cause a positive demand shock (shift to the right) in aggregate demand?

increased consumer confidence and spending.

Inflation blurs perceptions because it may not be clear whether higher prices are caused by inflation, decreased supply, or _____. Increase supply lower inflation decreased demand increased demand

increased demand https://quizlet.com/198448359/chapter-22-flash-cards/

If the economy has cyclical unemployment, appropriate policies to pursue may include 循環的失業Cyclical unemploymentとは、景気の変動に伴って労働需要が減少することにより生じる失業

increased government spending that shifts the AD curve to the right.

You work as an economic analyst at a small manufacturing firm producing umbrellas. Your CEO is overjoyed that revenues doubled over the past month as prices increased 200%. She interprets the higher prices and strong sales as a signal there is a shortage in umbrellas, and orders production increased. How would you assess her interpretation of events?

inflation is a possible explanation for the price ans revenue increase, so analyzing input is advisable before increasing production

Recently the steel industry has struggled to compete with foreign imports. Economists cite high labor costs as a main impediment to the competitiveness of the domestic steel industry. How might modest inflation help the domestic steel industry compete?

it allows real wages to adjust downwards more easily

After a long period of high inflation the minister of finance pledges "never again" and sets the inflation target at 0%. Why might such a low inflation target be a poor policy?

it could result in deflation

The income-expenditure model illustrates when what is out of balance or inefficient? net exports levels of output or national income price levels

levels of output or national income

Suppose that a typical nurse earned 42000 in 1971. In addition, you know that in 2006 a typical nurse earns 61000. Finally, you also know that CPI in 1971 is 150 and in 2006 is 230. Given this information, the salary of a typical nurse in 2006 relative to 1971 is:

lower

It is important to remember when calculating the spending multiplier to determine government spending (in order to influencing the economy), the ________ in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure. macro equilibrium micro equilibrium formula

macro equilibrium

Suppose an economy is defined by the following: C = 150 + 0.7 (Yd). The 0.7 in this algebraic equation represents the ________. consumption function marginal propensity to consume autonomous consumption

marginal propensity to consume

Stagflation is typically caused by

negative supply shock

Which component of aggregate demand would initially be affected by a change in exchange rates?

net exports

Which is the smallest expenditure category in the US CPI?

other goods and services ( Not Apparel!!!)

A year ago Parker reached his retirement and left the business to pursue other interests. He is now spending lots of time playing golf and visiting his grandchildren. For purposes of employment he is considered:Correct!

out of the labor force.

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:

out of the labor force.

The term "full employment GDP" is synonymous with which of the following?

potential GDP

Using the context of an economy's existing inputs, market and legal institutions, what term is used to describe the maximum quantity that an economy can produce?

potential GDP

Economic growth is shown in the AS-AD model as a

rightward shift in the long run AS curve.

Inflationary pressure in the AS-AD model can be shown as a

rightward shift of the AD curve when the economy is already producing at its potential GDP

Inflationary pressure in the AS-AD model can be shown as a

rightward shift of the AD curve when the economy is already producing at its potential GDP.

In the 1970s, the price of oil was extremely high. This shock caused a

shift to the left in the aggregate supply curve.

When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit. smaller deficit smaller surplus larger deficit

smaller deficit

In the United States over the past several decades inflation has affected purchasing power. Which of the following BEST describes this effect?

$150 today has the same purchasing power as $20 in 1972.

Considering the figure, the macro equilibrium which is where aggregate expenditure is equal to national income is represented by ________.

$6000 and $6000 equilibriumの場所

Suppose that the price of Pineapples in 1980 is $1.9 and in 1999 it is $1.1. In addition, you also know that the CPI in 1980 is 200 and in 1999 it is 240. Given this information, what is the real value of Pineapples in 1980?

($1.9 / 200 )*100 real value of goods = Good/price index in 1980 *100

3 ways to measure cost of living:

- Consumer price index (CPI) - Producer price index (PPI) - GDP deflator Each of these has their own advantages and disadvantages but a common point is these all are measures of cost of living. I do briefly explain my ideas on the measures of cost of living below: https://www.chegg.com/homework-help/questions-and-answers/measuring-cost-living-discussion-question-measure-cost-living-issues-measuring-cost-living-q27272480?trackid=6bcc33c5179d&strackid=9d62b945ad15

What is the issues with CPI

- Mainly It measures the cost of private goods and services, it also means public goods and services not included. - It is calculated based on average price of a basket consumed by average consumers. - It took time to include new goods and eliminate old ones from the basket. it also means that there is a logistical time lag between new and old goods in the basket. - Quality improvement and its effect on consumers lifestyle not taken in account. - CPI does not account quality difference if the goods are similar goods.

What are the components used to create a consolidation view or stacked graph (or stacking on top of each other) of the aggregate expenditure function? -The graph would include the consumption function (after taxes), the investment function, and the government spending function. -The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function. -The graph would include the consumption function (after taxes) the government spending function, and the net export function.

-The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function.

In the figure, ΔY/ΔAE represents the spending multiplier, but how is it represented graphically? Change in Y / Change in AE = Y / AE -The spending multiplier is represented by the decrease in the AE line. -The spending multiplier is represented by the increase in the AE line. -The spending multiplier is represented by the increase in the 45 degree line

-The spending multiplier is represented by the increase in the AE line.

What is the best explanation for the slope of the neoclassical zone of the aggregate supply curve? 1) A small increase in aggregate demand when the economy is operating at potential output causes the price level to rise, with little or no effect on real output. 2) A small increase in aggregate demand when the economy is operating below its potential output will not have much effect on the price level. 3) An increase in aggregate demand causes both real output and the price level to increase.

1) A small increase in aggregate demand when the economy is operating at potential output causes the price level to rise, with little or no effect on real output.

★If aggregate supply is vertical, then which of the following statements must be true of the long-run? 1) Aggregate demand does not affect the quantity of output. 2) Inflation will accompany any rise in output. 3) Aggregate demand does not cause changes in the price level.

1) Aggregate demand does not affect the quantity of output.

How do rising tax rates affect tax revenue over time according to the Laffer curve? 1) At first tax revenue increases but then falls as tax rates reach certain levels. 2) At first tax revenue increase faster then slower as tax rates reach certain levels. 3) At first tax revenue decrease but eventually rise as tax rates reach certain levels.

1) At first tax revenue increases but then falls as tax rates reach certain levels.

How do rising tax rates affect tax revenue over time according to the Laffer curve? 1) At first tax revenue increases but then falls as tax rates reach certain levels. 2) At first tax revenue increase faster then slower as tax rates reach certain levels. 3) At first tax revenue decrease but eventually rise as tax rates reach certain levels.

1) At first tax revenue increases but then falls as tax rates reach certain levels.

Where is the macro equilibrium found in the income-expenditure model graphically? 1) At the level of GDP where national income equals aggregate expenditure. 2) At the market level where demand equals supply. 3) At the level of GDP where AD equals AS.

1) At the level of GDP where national income equals aggregate expenditure.

As a government economist you are tasked with estimating the impact of consumer electronics on the CPI. Which of the following is not an example of how consumer electronics cause the CPI to overstate the true cost of living? 1) Consumer electronics represent a relatively small share of consumer expenditure compared to rent, healthcare, and education. 2) The quality of new consumer electronic such as computers, tv, and cellphones is increasing rapidly. THerefore some of the price increases in these goodscan be attributed to better quality and not simple price increase

1) Consumer electronics represent a relatively small share of consumer expenditure compared to rent, healthcare, and education.

What is true about the expenditure multiplier? 1) GDP changes when the aggregate expenditure changes. 2) GDP does not change proportionally. 3) A larger change in expenditure causes a smaller change in GDP.

1) GDP changes when the aggregate expenditure changes.

Which of the following examples describe a progressive tax? Correct! 1) Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households. 2) Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000. 3) Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.

1) Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

Swazilialand is a country where the government's mandate is to have a balanced budget each year. This year the government's tax collections brought in $50 million more than expected. Because of the balanced budget mandate, the government has to Correct! 1) Increase spending by $50 million. 2) increase taxes by $50 million. 3) reduce spending by $50 million.

1) Increase spending by $50 million.

Which of the following is an example of Say's law? 1) The automotive industry, in order to create more output, need to focus on increasing production rather than demand. 2) The economy of the country of Wakanda has set fixed prices and wages for both the short and long term. 3) During the 2008-10 many people hoarded money instead of purchasing goods..

1) The automotive industry, in order to create more output, need to focus on increasing production rather than demand.

Of the following examples, which is associated with government spending for investment? Correct! 1) The federal government spends $400 million on fixing airports and upgrading control tower software and technology. 2) The federal government spends $5 million on office supplies for federal offices. 3) The federal government spends $2 million on updating and improving the security for the White House.

1) The federal government spends $400 million on fixing airports and upgrading control tower software and technology.

Which statement is the most accurate explanation of the expenditure multiplier? 1) When the aggregate expenditure changes, GDP changes. 2) As GDP changes it does so disproportionally. 3) A small change in GDP is caused by a large change in expenditure.

1) When the aggregate expenditure changes, GDP changes.

The Bank of Merica has been making risky mortgage loans to high risk individuals. A recession then takes place and the Bank of Merica has the potential to experience 1) a growing possibility of depositors creating a run on the bank. 2) a lower probability of a bank run by depositors. 3) equal risk with a bank run if it had exercised cautious loan behavior.

1) a growing possibility of depositors creating a run on the bank.

Of the following examples, which one is excluded from being an expansionary, discretionary fiscal policy? 1) an increase in tax rates. 2) a reduction in tax rates. 3) an increase in government purchases 4) an increase in transfer payments.

1) an increase in tax rates.

Property taxes are 1) imposed based on ownership of assets such as real estate and autos. 2) generally considered to be flat. 3) generally considered to be regressive.

1) imposed based on ownership of assets such as real estate and autos.

Assuming the government of country Balistan has a balanced budget requirement and collects $100 million more in taxes than expected in 2016. As a result, the government would have to 1) increase spending by $100 million. 2) reduce spending by $100 million. 3) increase taxes by $100 million.

1) increase spending by $100 million.

The quantity of output that the economy can produce when it is at full employment of its labor and physical capital is the definition for 1) potential real GDP. 2) gap GDP 3) equilibrium GDP

1) potential real GDP.

In the neoclassical view, the economy has a ________ to move back to potential GDP. 1) self-correcting tendency 2) rational tendency 3) tendency to be unable

1) self-correcting tendency

When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit. 1) smaller deficit 2) smaller surplus 3) larger deficit

1) smaller deficit

The argument of neoclassical economists is that 1) the long run aggregate supply curve is at the level of potential GDP. 2) the long run aggregate supply curve moves gradually to the left as potential GDP grows. 3) the long run aggregate supply curve is horizontal.

1) the long run aggregate supply curve is at the level of potential GDP.

Assume the following macroeconomic variable ( in $ billion) for an economy: Y = national income = Aggregate Expenditures Aggregate Expenditures = Consumption + Investment + Government Spending + Net Export Assuming that the full employment level in $6,000 billion, determine the change in government spending needed to reach full employment. (Hint: calculate the current GDP, then calculate aggregate expenditures using national income of $6,000 and find the difference) Consumption (80% of disposable or after tax income) + $300 C = $350 + 0.8 (Y - T) Tax (20% of income) T = 0.2 Y Investment $700 Government Spending $1000 Exports $550 Imports 0.1 (Y - T) 1) -$40 2) $40 3) $160

2) $40

How do rising tax rates affect tax revenue over time according to the Laffer curve? 1) At first tax revenue increase faster then slower as tax rates reach certain levels. 2) At first tax revenue increases but then falls as tax rates reach certain levels. 3) At first tax revenue decrease but eventually rise as tax rates reach certain levels.

2) At first tax revenue increases but then falls as tax rates reach certain levels.

To represent the consumption function through algebra, it would be expressed as ________. 1) C = a + MPS*Y, where a is autonomous consumption (the amount of consumption expenditure when Y = 0), MPS is the marginal propensity to save, and Y is national income 2) C = a + MPC*Y, where a is autonomous consumption (the amount of consumption expenditure when Y = 0), MPC is the marginal propensity to consume, and Y is national income 3) MPC + MPS = 1, where MPC is the marginal propensity to consume and MPS is the marginal propensity to save

2) C = a + MPC*Y, where a is autonomous consumption (the amount of consumption expenditure when Y = 0), MPC is the marginal propensity to consume, and Y is national income

When real GDP is more than potential GDP, the economy is experiencing 1) inflation. 2) GDP gap. 3) full employment.

2) GDP gap.

What economic term describes the economy's aggregate expenditure components NOT impacted by the real level of income? 1) Autonomous expenditure 2) Macroeconomic Equilibrium 3) Marginal Propensity to Consume

2) Macroeconomic Equilibrium

Long-term economic growth is best explained by the ________ model. 1) supply-side 2) Neoclassical 3) Keynesian

2) Neoclassical

If the aggregate demand in a macroeconomic increases, according to neoclassical theory, what happens to prices over the long term? 1) Prices are sticky and do not shift quickly either in the short or the long term. 2) Prices will be flexible and adjust back to equilibrium in the aggregate supply curve or potential GDP. 3) Prices remain consistent with historic prices and are inflexible.

2) Prices will be flexible and adjust back to equilibrium in the aggregate supply curve or potential GDP.

If the Federal Reserve did not regulate fiscal policy, monitor banks and provide services for banks, what would most likely be the economic conditions to transact business in the U.S.? 1) The economy would primarily be based on a barter system rather than a fiat system. 2) The economy would be less efficient and transactions most likely more costly. 3) There would be no discrimination in lending by local banks.

2) The economy would be less efficient and transactions most likely more costly.

Assume that the government of country of Ostentia for its current budget plans to collect taxes in the amount of $10 billion and to spend $9 billion. A civil war breaks out and the government spends an additional $1 billion and tax collection is down by $1 billion. What is the result? 1) The expected budget deficit turns in to a $1 billion surplus. 2) The expected budget surplus turns in to a $1 billion deficit.

2) The expected budget surplus turns in to a $1 billion deficit.

Assume that the only source of revenue for the government is income tax. With government spending totaling $93 and a total of $127 collected in tax revenue, which of the following correctly states the position of the government's budget? 1) The government has a balanced budget of $93 billion. 2) The government has a budget surplus of $34 billion. 3) The government has a budget deficit of $34 billion.

2) The government has a budget surplus of $34 billion.

What do goods like gasoline, tobacco, and alcohol typically have in common? 1) A proportional tax is imposed on each of them. 2) They are all subject to government excise taxes. 3) A regressive tax is imposed on each of them.

2) They are all subject to government excise taxes.

Equilibrium occurs in the macroeconomy with the income-expenditure model where national income and aggregate expenditure are equal. Where does this equilibrium occur? 1) Where the aggregate expenditure schedule crosses the potential GDP line. 2) Where the aggregate expenditure schedule crosses the 45-degree line. 3)Where the aggregate expenditure schedule crosses the real GDP (Y) line.

2) Where the aggregate expenditure schedule crosses the 45-degree line.

Of the following explanations of the short run aggregate supply curve, which best explains the relatively horizontal area? 1) With an economy operating at potential output, an increase in aggregate demand causes a rise in the price level, but has no or little effect on real output. 2) With an economy operating below potential output, an increase in aggregate demand causes real output to increase with no or little effect on the price level. 3) An increase in aggregate demand causes both the price level and real output to increase.

2) With an economy operating below potential output, an increase in aggregate demand causes real output to increase with no or little effect on the price level.

Automatic stabilizers during a recession include 1) Social Security payments. 2) food stamps. 3) property tax rates.

2) food stamps.

Sales taxes are 1) generally considered to be progressive. 2) imposed as a percentage of the value of the purchase. 3) a tax burden that is entirely paid by consumers.

2) imposed as a percentage of the value of the purchase.

A decrease in government expenditure shifts the AD curve to the ________ and a decrease in taxes shifts the AD curve to the ________. 1) right; right 2) left; right 3) right; left 4) left; left

2) left; right

The Keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on ________. 1) short-term fluctuations caused by technological change and labor force growth 2) long-run determinants of output and employment 3) immediate determinants like changes in hiring and firing

2) long-run determinants of output and employment

An argument to promote research and development in technology is that it will 1) lead to many patents on innovations. 2) promote economic growth in the long run. 3) lead to a more equitable (fair) distribution of income.

2) promote economic growth in the long run.

Ari's income and federal income tax contributions are in the table below. What is the federal income tax in Ari's country? Taxable Income? Federal Income Tax Payment 2016 $80,000 $10,000 2017 $94,000 $11,750 1) progressive. 2) proportional.

2) proportional.

An expansionary fiscal policy can increase the level of aggregate demand by 1) decreasing government purchases. 2) reducing corporate tax rates to increase investment spending. 3) reducing grants to state and local governments.

2) reducing corporate tax rates to increase investment spending.

A country's government should ________ when inflation begins to climb to unacceptable levels in the economy. 1) shift aggregate demand to the right by using contractionary fiscal policy 2) shift aggregate demand to the left by using contractionary fiscal policy 3) shift aggregate demand to the right by using expansionary fiscal policy 4) shift aggregate demand to the left by using expansionary fiscal policy

2) shift aggregate demand to the left by using contractionary fiscal policy

Graphically, the aggregate expenditure function is formed by adding together (or stacking on top of each other) ________. 1) the consumption function (after taxes), the investment function, and the government spending function 2) the consumption function (after taxes), the investment function, the government spending function, and the net export function 3) the consumption function (after taxes) the government spending function, and the net export function

2) the consumption function (after taxes), the investment function, the government spending function, and the net export function

In 2016, the government of Ostentia experienced a budget deficit of $40 billion and as a result 1) the government of Ostentia's debt would decrease by $40 billion. 2) the government of Ostentia's debt would increase by $40 billion. 3) the government of Ostentia's debt would be $40 billion.

2) the government of Ostentia's debt would increase by $40 billion.

If a person has zero income, consumption still exists because ________. 1) sales encourage people to buy 2) there are basic needs people still have to meet 3)a basic income is always made by people

2) there are basic needs people still have to meet

During a recession, automatic stabilizers include 1) Social Security payments. 2) unemployment benefits. 3) income tax rates.

2) unemployment benefits.

What is the shape of the intermediate zone of the AD-AS curve? 1)horizontal 2) upward-sloping

2) upward-sloping

If government spending increased by $5 billion and the expenditure multiplier is 3.2, what would be the increase in the real GDP? 1) $15 billion 2)$16 billion 3) $8.2 billion

2)$16 billion

The statement, "An effective stimulant for a recessionary economy is providing subsidies for investors" is aligned best with: 1) Supply and Demand Law. 2)Say's Law. 3)Keynes Law.

2)Say's Law

For the definition of inflation, which of the following BEST fits? 1)A new car model costs 12% more than the previous year's model. 2)The price of most goods and services increases by 6% over a 3 year period.

2)The price of most goods and services increases by 6% over a 3 year period.

It is important to remember when calculating the spending multiplier to determine government spending (in order to influencing the economy), the ________ in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure. 1) formula 2)macro equilibrium 3) micro equilibrium

2)macro equilibrium

Jontel got a raise, which may help the economy since 1) she will likely hoard more money to prepare for fluctuations in the economy. 2)she will likely consume more goods and services. 3) she will likely put more money in savings.

2)she will likely consume more goods and services.

If out of 125 people in the labor force, the number of employed workers is 100 and number of unemployed workers is 25, then the unemployment rate is ________.

20%

In Imarith Country, there are only 4 consumer goods or services: tourism, popcorn, carrots, and berries. Using the data in the following table, please calculate the CPI values for 2010 and 2017, using 1990 as a base year. The average family purchased the market basket indicated by the columns "Items" and "Quantity." . Items Quantity Year: 1990 Year: 2010 Year: 2017 Price Amount Spent Price Amount Spent Price Amount Spent Tourism 2 $135.00 $167.00 $220.00 Popcorn 25 $5.00 $5.75 $9.00 Carrots 10 $1.00 $2.55 $4.50 Berries 15 $2.50 $3.50 $6.00 Total 2

2010: 126; 2017: 181

The following table indicates the CPI for the country of Praton over the last four years. Using the information in the table, calculate the annual inflation rates. Which time frame had the lowest annual inflation rate? Year 2014 CPI 100 2015 109 2016 122 2017 127

2014-2015 (127-122)/122*100=4.09% Year 2014 -2015>>>>(109-100)/100*100=4.76%

The Department of Economic Health in the country of Cavia has calculated the price index for a basket of goods from 2014 to 2018. January 2014 is the standardized price index (at 100) for a basket of consumer goods. The price index increased in 2015 to 105.7, in 2016 to 108.6, in 2017 to 115.9, and in 2018 it increased to 120.4. What are the inflation rates in Cavia for 2015, 2016, 2017, and 2018?

2015: 5.7%; 2016: 2.7%; 2017: 6.7%; 2018: 3.9%

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals ______?

25%

Suppose that the nominal interest rate in the US is 7.4%. In addition, the inflation rate is equal to 4.4%. Given this information, what is the real interest rate in the US?

3%

Which one of the following statements is accurate in explaining the expenditure multiplier effect? 1) A cash infusion into an economy has a larger impact than an increase is spending. 2) There is no impact from an increase in spending. 3) A cash infusion has less of an impact on an economy than an increase in spending.

3) A cash infusion has less of an impact on an economy than an increase in spending.

Which of the following scenarios illustrates a different market other than the financial market for money? 1)A household securing a home loan from a bank. 2) A business going public on the New York Stock Exchange. 3) A child's lemonade stand where she charges $1 cash per glass.

3) A child's lemonade stand where she charges $1 cash per glass.

________ are a form of tax and spending rules that can affect aggregate demand in the economy without any changes in legislation. 1) A new spending bill passed by Congress 2) A new law mandating higher payroll taxes 3) Automatic stabilizers

3) Automatic stabilizers ビルト・イン・スタビライザーとは、財政自体に備わっている、景気を自動的に安定させるプロセス（装置）のこと

Which of the following is a true statement about Say's Law in the neoclassical zone pictured in the above graph? 1) Unemployment is affected by shifts in the AD curve because the equilibrium point is close to or at potential GDP. 2) The LRAS curve moves depending on whether the AD curve moves to the right or left. 3) Because the LRAS is at full output it is creating demand and shifts of the AD curve have little to no effect on supply output.

3) Because the LRAS is at full output it is creating demand and shifts of the AD curve have little to no effect on supply output.

Consider national income, which statement is accurate about the function of export and imports in it? 1) Exports and imports are vertical lines with imports being negative as it relates to real GDP. 2) Exports and imports are horizontal lines, with imports being positive as it relates to real GDP. 3) Exports and imports are horizontal lines with imports being negative as it relates to real GDP.

3) Exports and imports are horizontal lines with imports being negative as it relates to real GDP.

Assume that the government of country of Ostentia for its current budget plans to collect taxes in the amount of $10 billion and to spend $9 billion. A civil war breaks out and the government spends an additional $1 billion and tax collection is down by $1 billion. What is the result? 1) The expected budget surplus turns in to a $2 billion deficit. 2)The expected budget deficit turns in to a $1 billion surplus. 3) The expected budget surplus turns in to a $1 billion deficit. 4) Foreign financial funds have increased their presence.

3) The expected budget surplus turns in to a $1 billion deficit.

The country of Bagernat's analyzes its economic data and discovers a substantial decrease in the financial capital accessible to private sector companies. What is the most likely cause of this circumstance? 1) Households savings have become large. 2) Foreign financial funds have increased their presence. 3) The government's continued extensive borrowing.

3) The government's continued extensive borrowing.

What are the components used to create a consolidation view or stacked graph (or stacking on top of each other) of the aggregate expenditure function? 1) The graph would include the consumption function (after taxes), the investment function, and the government spending function. 2) The graph would include the consumption function (after taxes) the government spending function, and the net export function. 3) The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function.

3) The graph would include the consumption function (after taxes), the investment function, the government spending function, and the net export function.

What is a very important piece of information to remember when calculating the spending multiplier which determines the level of government spending to impact the economy? 1) The micro equilibrium in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure. 2) The formula in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure. 3) The macro equilibrium in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure.

3) The macro equilibrium in the income-expenditure model is found at the point where the level of GDP/national income equals aggregate expenditure.

Which of the following statements about government spending is true? 1) Interest payments on government debt as a percentage of GDP have steadily increased. 2) Total government spending as a percentage of GDP has increased every year since the 1960's. 3) The share of healthcare spending in GDP has increased substantially since the 1960's.

3) The share of healthcare spending in GDP has increased substantially since the 1960's.

The Fed's seven member ruling board of Governors are 1) elected, following congressional confirmation, and serve 14-year terms. 2) appointed by the president, confirmed by congress, and serve 4-year terms. 3) appointed by the president, confirmed by congress, and serve 14-year terms.

3) appointed by the president, confirmed by congress, and serve 14-year terms.

Economists who hold to Neoclassical views are most aptly described as ________ . 1) supply-siders 2) aggregate demand policy interventionists 3) believers in perfect competition

3) believers in perfect competition

Which of the following scenarios would most likely be viewed from a neoclassical perspective as an undermining element of the long-run productivity growth in an economy? 1)stimulus spending by the government 2) unemployment that is cyclical 3) business capital investment tax cuts

3) business capital investment tax cuts

During recessionary times it can be hard to coordinate lower wages for workers because of the ________. 1) discoordination argument 2) relative wage theory 3) coordination argument

3) coordination argument

Suppose an economy is defined by the following: C = 136 + 0.9 (Yd). The (Yd) in this algebraic equation represents the ________. 1) discretionary income 2) pre-tax income 3) disposable income

3) disposable income 0.9 represents - marginal propensity to consume

Keynesian economists believe that the economy needs to be influenced in order to correct itself from the effects of unemployment and inflation. This can be done through ________ policies. 1) monetary 2)accounting 3) fiscal

3) fiscal

What factors should equal each other in order to find macro equilibrium in a table? 1) imports and exports 2)taxes and the Keynesian Cross 3) gdp/national income and aggregate expenditure

3) gdp/national income and aggregate expenditure

The Keynesian model focuses more on short-term fluctuations caused by business cycles and the neoclassical model focuses more on ________. 1) short-term fluctuations caused by technological change and labor force growth 2)immediate determinants like changes in hiring and firing 3) long-run determinants of output and employment

3) long-run determinants of output and employment

Price changes can cause substantial cost to company resources. An example of this is called ________. shoe leather costs 1) shoe leather costs 2) atm costs 3) menu costs

3) menu costs

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP? 1) inflationary gap 2) expenditure-output 3) recessionary gap

3) recessionary gap

Former President Ronald Reagan was a supporter of supply side economics. Supply side economists believe that 1) reducing tax rates increases aggregate demand. 2) reducing tax rates decreases aggregate supply. 3) reducing tax rates increases aggregate supply. 4) increasing tax rates decreases aggregate demand.

3) reducing tax rates increases aggregate supply. He has a neoclassic view

Unlike the neoclassical approach to the economy, the Keynesian approach focuses on sticky prices and aggregate demand. This focus is advantageous for understanding the reason cyclical unemployment and recessions occur, as these fluctuations take place in the ________ -run. 1)long 2) gap 3) short

3) short

Since the 1930s, bank runs are not problematic in the United States because 1) the FDIC's deposit insurance program punishes any banks that do not hold enough money in their reserves. 2) private deposit insurance programs have stepped in to supplement the FDIC and guarantee that depositors will receive all of their investments. 3) the FDIC provides deposit insurance and guarantees that depositors will receive a portion, if no all, of their money.

3) the FDIC provides deposit insurance and guarantees that depositors will receive a portion, if no all, of their money.

Say that an economy is defined by the following algebraic equation: C = 322 + 0.7 (Yd). What does the algebraic equation represent? 1) the marginal propensity to consume 2) autonomous consumption 3) the consumption function

3) the consumption function

In the neoclassical model, economic growth through technological change over time shifts potential GDP and the ________ gradually to the right. 1) vertical Phillips curve 2) vertical AD curve 3) vertical AS curve

3) vertical AS curve

If a government expands its fiscal policy to raise equilibrium output, what will happen in the long term, according to the neoclassical view of the economy? 1)It will not work because it will raise the level of unemployment. 2)It will not work because it will disincentivize production. 3)It will not work because the flexible prices will eventually choke off any increase in aggregate demand.

3)It will not work because the flexible prices will eventually choke off any increase in aggregate demand.

If you were to explain to a friend how the macroeconomy would be influenced by neoclassical policies, which of the following statements would be the correct explanation? 1) The macroeconomy has flexible prices and wages it is self correcting but still needs governmental regulation of wage policies, price ceilings and floors. 2) The macroeconomy has inflexible prices and wages meaning it is not self correcting and in need of governmental intervention for correction. 3)The macroeconomy has flexible prices and wages and it is self correcting and not in need of governmental intervention for correction.

3)The macroeconomy has flexible prices and wages and it is self correcting and not in need of governmental intervention for correction.

If an economy falls into a recession, there is no way to coordinate lower wages across the economy for workers according to Keynes because of the ________. 1) complexity argument 2) progressive wage theory 3)coordination argument

3)coordination argument

For the GDP to change when the AS curve is horizontal, means it must change through: 1) cyclical unemployment 2) increases or decreases in potential output. 3)increases or decreases in aggregate demand.

3)increases or decreases in aggregate demand.

Consider an economic graph where the aggregate supply curve is flatter than the market supply curve for services or labor or goods (micro) where price-levels don't fall. This graph is an example of a(n) 1) microeconomic externality. 2) negative externality. 3)macroeconomic externality.

3)macroeconomic externality.

In the price index was calculated at 115.3 with 2000 as the base year. In 2006 the price index increased to 119.5. What was the inflation from 2005-2006?

3.6 %

A government annually collects $320 billion in tax revenue and allocates $80 billion to education spending. What percentage of this government's budget is spent on education? 1) 1% 2) 12% 3) 30% 4) 25%

4) 25%

Which of the following is an example of an automatic fiscal policy stabilizer? 1) Congress decides to cut spending on national defense. 2) Congress cuts individual income tax rates. 3) Tax revenues rise after Congress raises corporate tax rates. 4) Tax revenues fall as real GDP decreases.

4) Tax revenues fall as real GDP decreases.

The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its ________ and its ________. 1) potential GDP; cyclical unemployment rate 2) long-term growth; cyclical unemployment 3) real GDP; natural rate of unemployment 4) potential GDP; natural rate of unemployment

4) potential GDP; natural rate of unemployment

When inflation begins to climb to unacceptable levels in the economy, the government should 1) use expansionary fiscal policy to shift aggregate demand to the right. 2) use expansionary fiscal policy to shift aggregate demand to the left. 3) use contractionary fiscal policy to shift aggregate demand to the right. 4) use contractionary fiscal policy to shift aggregate demand to the left.

4) use contractionary fiscal policy to shift aggregate demand to the left.

The price index was 140 in one year and 240 in the next. What is the inflation rate?

71.4285714 (240-140)/140 *100=71.4285714

full employment rate

=A situation in which all available labor resources are being used in the most economically efficient way. Full employment embodies the highest amount of skilled and unskilled labor that could be employed within an economy at any given time. The remaining unemployment is frictional.

The relationship between the total quantity of output/real GDP firms are willing to produce and sell at each aggregate price level is known as

AD supply Curve

With a Consumer Price Index of 179.8 at the end of last year and 186.5 at the end of this year, the country experienced which of the following?

An inflation rate of 3.59 percent.

Accounting for quality improvements is one of the major challenges to using the CPI as a measure of the cost of living. Quality changes in which of the following goods is likely to give economists the most trouble? 消費者物価指数を生活費の尺度として活用する上で、品質改善の考慮は大きな課題の1つです。品質の変化は、エコノミストに最も問題を与える可能性が高い次の商品のどれですか? Automobile fresh fruit kitchen utensils

Automobile ( Increase fuel efficiency, reliability, and additional features are difficult to account for in the CPI, and will cause it to understand living standards.

What is the correct formula for calculating Aggregate Demand (AD)?

C + I + G + (X-M)

During an inflationary gap due to overly sufficient aggregate demand, the government should ________ spending by an amount determined by the spending multiplier in an attempt to return the economy to potential GDP/full employment. decrease stay the same increase

Decrease

Which of the following things are taken into consideration when using the aggregate demand-aggregate supply (AD-AS) model to illustrate growth and changes in the economy?

Increased labor productivity.

Explain why inflation can hurt some and help others due to the redistribution of purchasing power.

Inflation can benefit those who have borrowed money before the inflation if the wages rise. They will have more money to pay the same amount that was owed before. But this hurts the lender as they amount has less purchasing power now. But if the wages do not increase, the inflation will benefit the lenders as more people will borrow money.

Considering that Aggregate Expenditure = C + I + G + (X - M), which function is drawn as a horizontal line? Investment Consumption Imports

Investment ( Government function and Investment function are horizontal )

How may low inflation actually assist labor markets adjust towards equilibrium?

It allows for the gradual downward adjustment of real wages.

Which of the following statements is incorrect regarding the potential GDP line? It is a vertical line It assumes less than full employment of its labor and physical capital. It refers to the quantity of output the economy can produce

It assumes less than full employment of its labor and physical capital

Looking at the figure above, why does the line for the consumption function not start at zero? It does not start a zero because of the marginal propensity to save. It does not start a zero because of autonomous consumption. It does not start a zero because of the marginal propensity to consume.

It does not start a zero because of autonomous consumption.

Which of the following does NOT describe inflation?

It means that the price of every good and service is rising.

Which of the following characteristics is true of money? it does not generally need to be accepted as a means of payment. It must represent value. it must be backed by the government.

It must represent value.

This year the economy is strong and there is every expectation that it will continue to be strong over the next few years. With this confidence in the economy, what would most likely happen to the consumption function? It will shift the consumption function upward. It will shift the consumption function downward. It will move consumption to a higher level along the existing consumption function.

It will shift the consumption function upward.

The potential GDP line is a vertical line on the ________ indicating where GDP is at potential on the horizontal axis. microeconomic equilibrium graph individual supply and demand graph Keynesian Cross diagram

Keynesian Cross diagram

In 1985 inflation in Israel reached a record 500%. How did this period of high inflation affect market adjustments towards equilibrium price and quantity?

Markets adjusted to equilibrium more erratically and slowly.

In 1989-90 inflation in Poland reached over 600%. How did this high inflation affect market adjustments towards equilibrium quantity and price?

Markets adjusted to equilibrium more erratically and slowly.

An example of a financial market is the ________. The Liability Market Fiat Market NASDAQ Stock Market

NASDAQ Stock Market

Compared to developed countries, developing countries...

Often lack reliable or regular unemployment statistics

Over the past year inflation in Tropico has increased to over 40%. As an economist, you are tasked with identifying those most vulnerable to the ravages of high inflation so that the government knows whom to help first. Which of the following types of people is most likely to be harmed by high inflation

Pensioners living on a fixed income

and the y axis labeled Aggregate Expenditure (dollars). The x and y axis have points 0, 200, 400, 600, 700, 800, and 1,000. There are 4 lines. Line 1 is vertical with the plot point of 800,0, line 2 is an upward sloping line starting at 0,0 and ending at 800,800. Line 3 and 4 are upward sloping lines that start at around 0,400. There are two dotted lines that meet at point 700,700.) In the figure, which line is the potential GDP Line?

Potential GDP is vertical line

In Figure 1a above, which curve illustrates more cyclical unemployment?

Real GDP から遠いラインが正解。 AD1 line which is furhter away from potential/GDP full employment thatn AD0 line so that AD1 line represents more cyclical unemployment in the economy AD1 line which

Which of the following is a commonly cited explanation for persistently high unemployment rates in Europe compares to the United States?

Stricter hiring and firing rules for employers.

Which form of unemployment suggests workers need to seek education and training and to update their skill sets?

Structural

The country of Zanzibar has experienced a halt in its technological growth and innovation over a protracted period. Which CPI bias problem is likely to persist in this scenario? Correct

Substitution bias

In compiling the CPI for the fictional country of Doggerland the fresh fruit component of CPI is calculated assuming the average consumer buys 4 apples, 5 pears, and 2 peaches each week. Over the course of the survey the price of apples has doubled while the price of pears and peaches has remained mostly unchanged. This is likely to cause WHICH shortcoming in the CPI? In which direction will this bias the CPI as a measure of the cost of living?

Substitution bias, which will overstate the true cost of living, Substitution bias is the effect of consumers switching to relatively less expensive goods as a result of relative price changes. This will cause the CPI to overstate the cost of living, as its basket of goods remains unchanged.

Over the past ten years the cost of subscription cable service has substantially increased while the cost of internet services has fallen. At the same time new TV streaming services have been introduced which allow consumers to watch premium cable channels over the internet. How will this cause the CPI to overstate the cost of living?

Substitution bias- consumers are likely to switch from cable services to internet streaming services as a result of the relative price change

The prices of which of the following items are included in the PPI?

Supplies, finished goods, intermediate goods, crude materials by producers As an economic analyst working for a major manufacturer, you are tasked with tracking the rising costs of inputs over the past several years.

Consider if consumers increase spending and if the aggregate supply curve remains unchanged, then what will happen to aggregate demand and real GDP?

The AD will increase and real GDP will increase

The mid-1990s saw a rise in the use of mobile phones in the general population. The technology continued to improve in the early 2000s and in the mid-2000s smartphones revolutionized the way people communicated. The technology has changed very rapidly and improved the lives of consumers. With these rapid changes, what would you suspect has happened to the CPI calculation?

The CPI has overstated the cost of living because of quality improvement bias.

If the economy was running with ideal conditions, inflation wouldn't be blurring the price signals. If prices and wages rise at a consistent 15% then people could shift their expectations. As an example, if the price of eggs increased by 15% and the price of the input chicken feed also rose by 15%, the sellers should know that the real price of eggs has not changed. The market equilibrium price and quantity has not changed. In the real world why does inflation actually result in shortages and surpluses?

The changes to prices are not smooth or synchronized.

What best explains the fluctuations in the unemployment rates over the past 50 years?

The cycles of economic recessions and expansions. 3.6%

What type of financial vehicle or market brings lenders and borrowers together? A financial product. The financial market. Financial incentives.

The financial market.

All else equal, how would decreasing unemployment insurance affect the natural rate of unemployment?

The natural rate of unemployment is likely to decrease.

In recent years worker productivity growth in the small country of Xanadu has nearly doubled as new technologies have revolutionized many manufacturing and service sectors. As an economist analyzing the phenomenon you are surprised to find that wage growth has remained stagnant despite these productivity gains. Based on these findings, what do you expect to find when you review the natural unemployment rate during this period?

The natural unemployment rate will decrease due to productivity growth wage growth.

Why are cross-country comparisons of unemployment rates difficult?

There are non-traditional labor markets (i.e. barter, subsistence agriculture) in many developing countries.

This past year inflation in the fictional country of Zeelandia reached an astonishing 150%. A fellow economist at the Ministry of Economics claims this will have little effect on price signaling, as producers can simply take the 150% inflation as a given and interpret any deviations as a true price signal. For example, if the cost of oranges increases by 155% while inflation is 150% then demand has increased and producers should produce more oranges. Do you agree with your colleague's assessment? Why or why not?

This is a poor assessment as short term inflation and price changes are not so predictable

•How do you calculate labor force percentages and the unemployment rate?

Unemployed people / total labor forced *100

and the y axis labeled Aggregate Expenditure (dollars). The x and y axis have points 0, 200, 400, 600, 700, 800, and 1,000. There are 4 lines. Line 1 is vertical with the plot point of 800,0, line 2 is an upward sloping line starting at 0,0 and ending at 800,800. Line 3 and 4 are upward sloping lines that start at around 0,400. There are two dotted lines that meet at point 700,700.) Of the lines in this graph, which indicates is the line for potential GDP?

Vertical line

Imagine the economy is defined by the consumption function of C = 200 + 0.9 (Yd) where 200 is autonomous consumption, 0.9 is marginal propensity to consume, and Yd is disposable income (after taxes) and Yd=Y-T, where Y is national income (or GDP) and T=Tax Revenues=0.3Y (0.3 is the avg. income tax rate). Find the macro equilibrium using the following equation Y = C + I + G + (X - M) where C=200 + 0.9(Yd), I=600, G=1000, X=600, M=0.1Y. What is the equilibrium for this economy? [Remember Y=AE] Y = 3810 Y = 5454 Y = 4286

Y = 5454

Causes of a recessionary gap include ________. an increase in government spending a decline in savings a decline in consumption

a decline in consumption

In the chart below concerning the shifts in aggregate supply, arrow A represents an economy that is moving in response to ________ ←A Aggregate demand moving left →B Aggregate demand moving right

a decrease in productivity

If the economy is in an expansionary period, appropriate policies to pursue may include:

a reduction in government spending that shifts the AD curve to the left.

On the far right side of the AS curve, the economy is producing ________ potential, and on the far left of the curve, it is producing ________ potential.

above; below

If you are looking at a country that has a relatively high proportion of workers ________, then the theory of frictional unemployment suggests that workers in this age group are the least likely to be unemployed for a significant period of time.

age 25-54

In macroeconomics, ________ denotes the total quantity of spending on domestic goods and services.

aggregate demand (AD)

the amount of total spending on domestic goods and services in an economy

aggregate demand (AD):

A key part of the Income-Expenditure model is understanding that as GDP (or national income) rises, so does ________. aggregate supply aggregate demand aggregate expenditure

aggregate expenditure

In macroeconomics, ________ denotes the total quantity of output or the real GDP of what companies produce and sell.

aggregate supply (AS)

If you are looking at a graph where a cumulative upward sloping curve plots the relationship between price level and output for suppliers, you are looking at a

aggregate supply curve graph.

As the aggregate price level in an economy rises, ________.

aggregate supply increases

The relationship between the total quantity of output or real GDP firms will produce and sell is known as

aggregate supply.

The labor force consists of:

all adults who are working or actively seeking work.

Consumption, investment, government spending, and net exports are

all components of aggregate demand.

In the chart below concerning the shifts in aggregate supply, arrow B represents an economy that is moving in response to ________ ←A Aggregate demand moving left →B Aggregate demand moving right In the chart below concerning the shifts in aggregate supply, Arrow B represents an economy that is moving in response to ________.

an decrease in input prices A technology innovation

When price levels go up, it causes ________ the aggregate supply curve.

an upward movement along

Due to the wealth effect, an increase in the price level will cause The wealth effect - 金融資産効果 名目資産の価格及び価値の上昇に伴い、消費や投資、あるいは雇用などが活発化すること。特に株価や土地価格の上昇が、消費や投資の拡大に影響を与えることを指す場合が多い。

consumer spending to decline.

Aggregate Demand (AD) is defined as C + I + G + (X-M). C refers to ________. !

consumption spending

In the AS-AD model depicting economic growth, the vertical line that represents potential GDP will

gradually shift to the right in the long run.

If the economy is experiencing an inflationary gap, the equilibrium level of GDP is greater than potential GDP. less than potential GDP. equal to potential GDP.

greater than potential GDP.

The aggregate-demand curve ________ and the aggregate supply curve ________.

illustrates a negative relationship between the price level and real outputs Illustrates a positive relationship between the price level and real output

A flat tax imposes a regressive tax decreases with income. is a progressive tax. imposes a single, identical tax rate on the income of all taxpayers.

imposes a single, identical tax rate on the income of all taxpayers.

Calculation for inflation

inflation = ( CPI in year 2 - CPI in year 1 ) / CPI in year 1

Looking at the figure, what represents the macro equilibrium where aggregate expenditure is equal to national income? point a point b point d point c

point b macro equilibrium point!

According to a Keynesian AD-AS model, when any level of GDP is below potential, real GDP is affected with any change in AD, but the ________ remains unaffected. spending level price level export level

price level

The pure Keynesian AD-AS model assumes that for any level of GDP below potential, any change in AD affects real GDP, but NOT the ________. output level price level spending level

price level

Aggregate supply (AS) denotes, while holding the price of inputs fixed, the ________ that firms choose to produce and ________.

price level for output; GDP

One benefit to falling aggregate demand is that

price levels go down.

When Aggregate Demand increases enough to push production above potential GDP, the result is that

production at that level will be unsustainable in the long run

Aggregate supply curves, for high levels of output, are ________ and ________ for low levels of output.

relatively steep; relatively flat

Women in Switzerland finally got the vote in 1971. As more and more women entered the workforce, Switzerland looked to the U.S. to see what kinds of changes this meant for the employment market and the unemployment rate. From these U.S. statistics, Switzerland learned that over time in the US as women entered the workforce in the late 20th century the long-run US unemployment rate

remained mostly unchanged.

Aggregate demand is more likely than aggregate supply to ________ in the short run. remain unchanged increase slightly shift substantially

shift substantially

The economic model of aggregate demand curve and aggregate supply curve helps explain the

shifts in real GDP and the price level.

One of the goals of the economic model of aggregate demand curve and aggregate supply curve is to help explain the

shifts in the price level and the real GDP.

Potential GDP can be passed by real GDP only in the

short run.

Consider if the price level goes down but the wage rate does not change. If wages are sticky downward, then

some firms could potentially shut down and the quantity of real GDP supplied would decrease

★The aggregate demand-aggregate supply (AD-AS) model can be used to analyze all of the following EXCEPT

speed of adjustment from recession to expansions (AD-AS diagram can be used to analyze economic growth)

Shifts in the aggregate supply curve can be caused by

technological innovation.

The combination of the aggregate expenditure line and the income=expenditure line (i.e. the 45 degree line) is called ________. the macro equilibrium the Keynesian Cross output aggregate expenditure

the Keynesian Cross

The combination of the aggregate expenditure line and the income=expenditure line (i.e. the 45 degree line) is called ________. the macro equilibrium output aggregate expenditure the Keynesian Cross

the Keynesian Cross

Consumer Price Index:

the average price of the goods and services typically purchased by urban consumers

Say that an economy is defined by the following algebraic equation: C = 322 + 0.7 (Yd). What does the algebraic equation represent? autonomous consumption the marginal propensity to consume the consumption function

the consumption function

In 2016, the government of Ostentia experienced a budget deficit of $40 billion and as a result the government of Ostentia's debt would decrease by $40 billion. the government of Ostentia's debt would increase by $40 billion. the government of Ostentia's debt would be $40 billion.

the government of Ostentia's debt would increase by $40 billion.

Considering the figure, the macro equilibrium occurs where the real GDP (Y) equals ________. $7,000 $5,000 $6,000

the macro equilibrium Aggregate demand real GDPが同じ数字とところ。

Potential real GDP is defined as ________. the quantity of output that the economy can produce when it is above the natural rate of unemployment the quantity of output that the economy can produce when it is at full employment of its labor and physical capital the quantity of output that the economy can produce when it is at less than potential employment of its resources

the quantity of output that the economy can produce when it is at full employment of its labor and physical capital

Periods of high inflation generate winners as well as losers. Those living on fixed incomes suffer as their income fails to keep pace with cost of living increases, while those holding loans on fixed interest rates see their debt burden diminish. If the public can gain as well as lose from inflation, why is inflation generally unpopular with the public at large?

the redistribution of purchasing power from inflation is seem as arbitrary and unfair

natural rate of unemployment

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time; the sum of frictional plus structural unemployment The lowest rate of unemployment that an economy can sustain over the long run. Keynesians believe that a government can lower the rate of unemployment (i.e. employ more people) if it were willing to accept a higher level of inflation (the idea behind the Phillips Curve). However,critics of this say that the effect is temporary and that unemployment would bounce back up but inflation would stay high. Thus, the natural, or equilibrium, rate is the lowest level of unemployment at which inflation remains stable. Also known as the "non-accelerating inflation rate of unemployment"

During the 1970s when inflation accelerated, middle-class Americans benefited primarily because

the value of their mortgage debts decreased in real terms.

One of the criticisms about the unemployment rate is that it considers discouraged workers to be out of the labor force and

under-reports the actual unemployment problem.

frictional unemployment:

unemployment that occurs as workers move between jobs

Consider an economy at full employment. If consumers and firms become less optimistic about the future economy then

unemployment will rise.

Last year the country of Barboo had its inflation increase by 200%. You work for the Barboo government as an economist and have been given the task to identify the sectors of Barboo's population that are affected by this inflation the worst. Which of the following group is probably the worst affected by inflation?

veterans existing on fixed (non-adjustable) government payments