Macro Ch 25

In macroeconomics, a _________________ is used to show the relationship between output and the input price level. A. Phillips curve B. microeconomic model C. expenditure-output model D. Keynesian framework

A. Phillips curve

According to the Keynesian framework, ________________________ may cause a recession, but not inflation. A. a major trading partner's economic slowdown B. a decrease in interest rates C. an increase in domestic investment D. a decrease in a major trading partners export prices

A. a major trading partner's economic slowdown

Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? A. bigger leakages B. smaller leakages C. increased trade D. decreased trade

A. bigger leakages

Refer to the graph shown below. At point B (towards the bottom of the curve): (downward curve from inflation to unemployment) A. economic growth is low or even negative. B. output is expanding. C. unemployment is very low. D. businesses may raise prices.

A. economic growth is low or even negative.

If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left to D1, while wages remained at w0 and prices remained at P0, what will be the result? A. excess supply B. natural rate of unemployment C. coordinated wage reductions D. depression

A. excess supply

According to the Keynesian framework, ____________________________ will not help reduce inflation, but may help a country get out of a recession. A. increased spending by the government on health care B. increased taxes on business investments C. decreased military spending D. increased consumer tax rate

A. increased spending by the government on health care

The equilibrium quantity of labor decreases and the equilibrium wage increases when: A. labor supply shifts to the left, if wages are flexible. B. labor demand shifts to the left, if wages are flexible. C. labor demand shifts to the right, if wages are flexible. D. labor supply shifts to the right, if wages are flexible,

A. labor supply shifts to the left, if wages are flexible.

The sum of all the income received for contributing resources to GDP is called ___________________. A. national income (Y) B. national revenue (Y) C. marginal income (X) D. marginal revenue (X)

A. national income (Y)

Aggregate demand is more likely to _________________ than aggregate supply in the short run. A. shift substantially B. remain unchanged C. decrease substantially D. increase slightly

A. shift substantially

According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation? A. an increase in military spending B. a decrease in military spending C. increase in spending by the government on health care D. decrease in spending by government on health care

B. a decrease in military spending

According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession. A. decrease; interest rates B. an increase; domestic investment C. a decrease; a major trading partner's economy D. a decrease; a major trading partner's export prices

B. an increase; domestic investment

If markets throughout the global economy all have flexible and continually adjusting prices, then: A. all market-oriented economies will implement coordinated wage reductions. B. each economy will always head for its natural rate of unemployment. C. each economy must shift in aggregate demand and create additional employment. D. all changes in prices and wages will create additional employment.

B. each economy will always head for its natural rate of unemployment

Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period? A. interest rates B. exchange rates C. foreign income D. MPS

B. exchange rates

If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy: A. is producing at its potential GDP. B. is producing at a point where output is more than potential GDP. C. is producing at a point where output is less than potential GDP. D. is producing at its equilibrium point.

B. is producing at a point where output is more than potential GDP.

The equilibrium quantity of labor and the equilibrium wage increase when: A. labor supply shifts to the right, if wages are flexible. B. labor demand shifts to the right, if wages are flexible. C. labor demand shifts to the left, if wages are flexible. D. labor supply shifts to the left, if wages are flexible.

B. labor demand shifts to the right, if wages are flexible

The onset of a trade deficit is most likely supported by a country's: A. existing trade surplus. B. strong economic growth. C. reduction in the balance of trade. D. increased consumption function.

B. strong economic growth.

Refer to the graph shown below. At point A which is at the top of the curve: A. economic growth is declining. B. the economy has full employment. C. inflation tends to be declining. D. wages can be lowered due to worker surplus.

B. the economy has full employment.

Which of the following is a distinguishing characteristic of a Keynesian cross diagram? A. real GDP on the horizontal axis B. a flat line C. 45-degree line D. several different Phillips curves

C. 45-degree line

. When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by? A. 100 B. 300 C. 500 D. 900

C. 500

____________________ will not cause a shift of the AS curve in a Keynesian framework. A. Prices of inputs B. Changes in input prices C. Changes in output prices D. Changes in inputs

C. Changes in output prices

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is supported by the: A. neoclassical expenditure-output model. B. Keynesian cross diagram. C. Keynesian Phillips curve tradeoff. D. Keynesian Inflation trade-off model.

C. Keynesian Phillips curve tradeoff.

Refer to the graph shown below. (downward curve from inflation to unemployment) This graph illustrates a: A. Keneyesian Curve. B. Neoclassical Curve. C. Phillips Curve. D. Labor Demand Curve

C. Phillips Curve.

Consumption, investment, government spending, exports, and imports are: A. all complementary elements of a market-orientated economy. B. some of the opposing elements found in a market-orientated economy. C. all components of aggregate demand. D. some of the building blocks of Keynesian analysis.

C. all components of aggregate demand.

If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy: A. is producing at its potential GDP. B. is producing at a point where output is more than potential GDP. C. is producing at a point where output is less than potential GDP. D. is producing at its equilibrium point.

C. is producing at a point where output is less than potential GDP.

The equilibrium quantity of labor and the equilibrium wage level decrease when: A. labor supply shifts to the right, if wages are flexible. B. labor demand shifts to the right, if wages are flexible. C. labor demand shifts to the left, if wages are flexible. D. labor supply shifts to the left, if wages are flexible.

C. labor demand shifts to the left, if wages are flexible.

In macroeconomics, what name is given to the costs of changing prices that businesses must consider? A. opportunity costs B. internal costs C. menu costs D. customer costs

C. menu costs

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? A. expenditure-output B. inflationary gap C. recessionary gap D. national income (Y)

C. recessionary gap

Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle? A. 42 B. 3.6 C. 16.66 D. 36

D. 36

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by? A. 50 B. 100 C. 200 D. 750

D. 750

According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession? A. increased spending by the government on health care B. an increase in taxes on business investments C. an increase in military spending D. a decrease in the tax rate on consumer income

D. a decrease in the tax rate on consumer income

According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions. A. sticky wage and price B. sticky wage C. Keynesian D. coordination

D. coordination

The equilibrium quantity of labor increases and the equilibrium wage decreases when: A. labor demand shifts to the left, if wages are flexible. B. labor supply shifts to the left, if wages are flexible. C. labor demand shifts to the right, if wages are flexible. D. labor supply shifts to the right, if wages are flexible,

D. labor supply shifts to the right, if wages are flexible,

Refer to the graph shown below. Point C (mid-curve) in the graph represents: A. the level Keynesian macroeconomic policy strives for. B. a moderate growth level in the economy. C. a moderate level of unemployment in the economy. D. moderate inflation and all of the above.

D. moderate inflation and all of the above.

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects. A. pricing strategy B. macro-economic model C. set of menu costs D. policy prescription

D. policy prescription

When the consumption function ordinates MPT 0.2, MPS 0.3, MPI 0.5, and MPC 0.7 are plotted on a graph, what will their values reflect? A. flatter consumption function due to low marginal propensity to tax B. steeper consumption function due to low marginal propensity to save C. flatter consumption function due to high marginal propensity to invest D. steeper consumption function due to high marginal propensity to consume

D. steeper consumption function due to high marginal propensity to consume

When an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in: A. mechanical devices. B. specialized services. C. computer or other technologies. D. tangible and/or intangible capital.

D. tangible and/or intangible capital.