macro
Suppose the natural unemployment rate is 5 percent, the actual unemployment rate is 6 percent, and potential GDP is $5,000 billion. Based on Okun's Law, real GDP is equal to ________ billion.
$4,900
If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical deficit is
$40 billion.
Suppose the unemployment rate is 8 percent and the natural unemployment rate is 6 percent. If potential GDP is $8 trillion, using Okun's Law what does real GDP equal?
$7.68 trillion
The short-run Phillips curve is another way of looking at
aggregate supply.
***A tax cut that increases the budget deficit results in ________ in the ________ loanable funds.
an increase; demand for
The supply-side effects of a change in taxes on labor income means that ________ in taxes on labor income shifts the ________.
an increase; labor supply curve leftward
The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the economy is Group of answer choices
at full employment.
Fiscal policies that move the economy toward potential GDP without a change in policy are called
automatic stabilizers.
The short-run Phillips curve is
downward sloping.
Ignoring any supply-side effects, suppose the government is considering cutting taxes by $100 billion or increasing government expenditures on goods and services by $100 billion. Then
both policies would increase aggregate demand but the tax cut has a smaller effect.
The use of the federal budget to achieve macroeconomic objectives of full employment and sustainable economic growth is
called fiscal policy.
Automatic stabilizers include
changes in induced taxes and changes in needs-tested spending.
The natural rate hypothesis asserts that
changes in the unemployment rate from changes in the inflation rate are temporary.
When an economy faces an inflationary gap, an appropriate fiscal policy is to
decrease government expenditure.
An increase in income taxes ________ employment and ________ potential GDP.
decreases; decreases
Increasing the income tax rate ________ the ________.
decreases; supply of labor
If aggregate demand decreases, the
economy moves to a lower inflation rate along its short-run Phillips curve.
On the long-run Phillips curve, the unemployment rate
equals the natural unemployment rate, but the inflation rate can be any value.
The short-run Phillips curve shifts upward when
expected inflation increases.
The balanced budget multiplier is based on the point that the ________ multiplier is larger than the ________ multiplier so that an equal increase in government expenditure and taxes ________ aggregate demand.
expenditure; tax; increases
When the government's expenditures exceed its tax revenues, the budget
has a deficit and the national debt is increasing.
If an economy is at the short-run equilibrium illustrated by the figure above, a discretionary fiscal policy to adjust the economy to full employment is to
increase taxes and decrease government spending simultaneously.
Needs-tested spending
increases as unemployment increases.
If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demand
increases by more than $100 billion.
If government expenditures on goods and services increases by $20 billion, then aggregate demand
increases by more than $20 billion.
The natural unemployment rate
increases when job search increases.
If a tax cut increases aggregate demand more than aggregate supply, real GDP ________ and the price level ________.
increases; rises
The short-run Phillips curve shows the relationship between the
inflation rate and the unemployment rate.
In the short run, if the economy is at full employment, then the quantity of real GDP
is equal to potential GDP, and the unemployment rate is equal to the natural unemployment rate.
The national debt
is the total amount of government debt outstanding.
In the figure above, if the actual inflation rate is 8 percent, then
it is more than the expected inflation rate.
The curve that shows the relationship between inflation and unemployment when the economy is at full employment is the
long-run Philips curve.
Moving along the short-run Phillips curve, a ________ unemployment rate can only be achieved by paying the cost of ________.
lower; a higher inflation rate
According to Okun's Law, for each 1 percentage point that the unemployment rate is above the natural unemployment rate, then
real GDP is below potential GDP by 2 percent.
The short run Phillips curve
shows the tradeoff between the inflation rate and the unemployment rate, and it shifts when the expected inflation rate changes.
The structural deficit is the deficit
that would occur at full employment.
Comparing the AS-AD model and the Phillips curve, we see that
the AS-AD model uses the price level and the Phillips curve uses the rate of inflation.
The national debt can only be reduced if
the federal budget is in surplus.
The long-run Phillips curve shows the relationship between Group of answer choices
the inflation rate and the natural unemployment rate.
When people use all the relevant data and principles of economics to forecast inflation, they are making
what is called a "rational expectation."