Macro exam 2
The tax multiplied is 5 and, as a result of a change in taxes, equilibrium real gdp changes by $200 billion. What was the initial changes in taxes?
$40 billion
If an increase of $10 billion of government spending results in an increase in equilibrium real gdp of $40 billion, the multiplier equals
40 billion / 10 billion = 4
In an economy with no income taxes or imports, the marginal propensity to consume is .80. The expenditure multiplier is
5.00
Suppose the economy was initially at potential GDP. Then the world economy expands so that foreign income rises. What would be true?
Aggregate demand within the us increases and in the long run, money wage rates will rise
As the economy moves towards its long run equilibrium, the ____ curve shifts _____ because ______
Aggregate supply, rightward, the money wage rate falls
What policy would be good if an economy has an inflationary gap
An increase in the income tax
To achieve full employment in a recessionary gap, there should be ____
An increase in the money supply
Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of _____
An increase in the price level
In an expansion, federal tax receipts increase proportionally more than real gdp without the need for any government policy. This increase in an example of _____
Automatic fiscal policy
In the labor market, the income tax creates a tax wedge which raises the ______ wage rate, reduces the ______ wage rate, and ______ employment
Before tax, after tax, decreases
A change in the full employment of labor shifts ______
Both the aggregate supply curve and the potential gdp curve
Which growth theory predicts that even when technology advances, real gdp per person always returns to a subsistence level of income
Classical growth theory
What policy encourages economic growth
Creation of tax free savings account
In Brazil last year, the growth rate of real gdp was 3.5 % and the population grew from 1,000 million people to 1,100 million. Real gdp per person ______
Decreased by 6.5 %
When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________
Does not change
The "double coincidence of wants" is _____
Eliminated with the use of money
The potential GDP line shows the level of real gdp_____
Equal to potential gdp, produced when the labor markets is in equilibrium, AND / OR when there is full employment
New growth theory asserts that
Human capital grows bc of choices and discoveries result from choices
Automatic stabilizers decrease the impact of a recession on the level of economic activity because they _______
Imply that disposable income does not change by as much as real gdp
The supply side effects show that a tax cut on labor income _____ the supply of labor and _____ employment.
Increases, increases
The government could increase aggregate demand by $1 trillion by _____
Increasing its purchases by less than $1 trillion
If the minimum is at the equilibrium wage in the labor market, _____
It will create neither a shortage nor a surplus
If the stock of physical capital (machinery, equipment, ect) and human capital remain the same and the population increases, then ______
Labor productivity will decrease
Classical growth theory predicts that increases in real gdp per person will _____
Not last bc higher income leads to a population explosion
One reason that the aggregate demand curve had a negative slope is because _______
People buy more foreign goods when the domestic price level rises
If the economy is in the expansion phase of a business cycle and investment increases, when then multiplier effect kicks in, the expansion ____
Picks up speed
At full employment, aggregate supply is = to ___
Potential gdp
What would result in an increase in equilibrium real gdp but a decrease in the equilibrium price level
Prices of crude oils decreases
Population growth directly brings growth in _____ because aggregate hours increase
Real gdp
How to calculate labor productivity
Real gdp / total labor hours
The productivity curve is a relationship between _____ and ______
Real gdp per hour of labor, capital per hour of labor
When we keep part of our wealth in a bank checking account, we are using money as a ______
Store of value
A change in money wages shifts ____
The aggregate supply curve but not the potential gdp line
What would result in an increase in both real gdp and the aggregate price level
The latest round of WTO talks significantly increases trade barriers which reduces imports
Although ________ initially proposes and ultimately approves the budget, the discussion and amendment process rests with ________.
The president, Congress
If workers are successful in obtaining 6 weeks of paid vacation where 2 weeks used to be the norm, then most likely:
The price levels will increase
Moving along a aggregate supply curve, as the price levels falls _____
The real wage rate increases
Once supply side effects are taken into account, tax cuts for labor income can change
The supply of labor and potential gdp
If you shop for a car online and compare car prices across dealerships, money is functioning as a ____
Unit of account
If capital per hour of labor decreases, real GDP per hour of labor _______
decreases for a given level of technology
A rise in the expected future inflation rate ______
increases aggregate demand
A recessionary gap means that short run macroeconomic equilibrium gdp ______
is less than full employment GDP
Needs-tested spending is defined as
spending on programs for people qualified to receive benefits.
The national debt can only be reduced if _____
the federal budget is in surplus.