EC 111 Exam 4 Aldridge
if lower profits in foreign countries result in decreased investment form foreign countries into the united states, continued investment growth from saving will have to rely more on
U.S. household saving
if a country does not engage in trade with other countries, it is known as
a closed economy
a rightward shift of AS could be caused by
a decrease in tariffs on imported goods
a decrease in restrictions on immigration will result in
a decrease in the price level and an increase in employment
which of the following would shift the philips curve to the left -contractionary monetary policy -contractionary fiscal policy -an increase in import tariffs -a decrease in the regulation of business
a decrease in the regulation of business
according to the supply-side theory, which of the following would shift the aggregate supply curve leftward? -a higher min wage -government deregulation -lower marginal tax rates -elimination of structural bottlenecks
a higher min wage
many economists argue that government price indexes overstate inflation by 1-2%. from the point of view of those designing economic policy, this is an example of
a measurement problem
structural unemployment is caused by
a mismatch btwn the skills of job seekers and the requirements of available jobs
for a negative sloping philips curve, an increase in AD would cause
a movement up the curve
what would be illustrated by monetarists to show the effect of an increase in the quantity of money on the economy
a rightward shift of aggregate demand
what would be illustrated by keynesians to show the effects of stimulative fiscal policy on the economy
a rightward shift of aggregate demand; AS makes a right side 90 degree L
an attempt to lower unemployment with demand-side stimulus policies will cause an increase in the price level, which is illustrated by
a rightward shift of the aggregate demand curve
over a given period of time, if imports are greater than exports, the result is
a trade deficit
if the terms of trade btwn two countries lie somewhere btwn their respective opportunity costs, then the effect of trade will include
consumption outside the ppc for both countries
when a country has a lower opportunity cost in producing a good than any other country
consumption possibilities will increase with specialization and trade
the sale of bonds by the Fed in the open market will result in a __ in the money supply and a __ shift of __
decrease; leftward; AD
monetarists believe that an increase in the money supply shifts the aggregate
demand curve to the right
what policy obstacle could occur because it is difficult to know how market participants will respond to specific policies
design problems
an inflationary GDP gap is equal to the
difference btwn equilibrium GDP and full-employment GDP
the idea of rational expectations suggests that
economic policies are ineffective if the policies are anticipated
a supply-side policy to cure a recession might include
elimination of the min wage
in terms of the world as a whole, imports must equal exports because
every good exported by one country becomes an import for another country
which of the following is a responsibility of congress? -monetary policy -fiscal and supply-side policy -monetary and fiscal policy -monetary, fiscal, and supply-side policy
fiscal policy and supply-side policy
the opportunity costs of different policies must be weighed to solve which obstacle
goal conflicts
the best measure of net investment is
gross investment - depreciation
what group believes that people will realize what the government is attempting to do and take action to offset government policy
new classical economist
expansionary monetary and fiscal policies are designed to move the economy, in the short run,
onto and along the ppc
the united states has an absolute advantage in producing t-shirts, but not a comparative advantage, because
other countries, such as china, can produce t-shirts at a lower oppoutunity cost relative to the united states
which of the following would shift the long-run AS curve to the right? -the elimination of government-subsidized college loans -the elimination of job training programs -a decrease in the marginal propensity to save -political and economic stability
political and economic stability
according to supply-side theorists, a decrease in marginal tax rates will provide the incentive to
produce more
supply-side tax cuts are designed to
reduce marginal tax rates
according to supply-side economists, federal regulation of transportation services
reduces AS
according to supply-side theorists, an increase in mandatory employee benefits would result in a
rightward shift in the philips curve
income taxes are an automatic stabilizer because when income rises, ceteris paribus, tax receipts
rise because taxes are computed on the basis of income
the best indication that stagflation is occurring
rising unemployment rate and rising inflation rate
corporations in the the united states spend a lot of money to familiarize management with global markets. this should
shift the economy's ppc outward
the deficit that would exist if the economy were at full employment
structural deficit
__ policy is designed to shift the ppc outward and shift the long-run AS curve to the right
supply-side
what group designs policies that are best at eliminating stagflation
supply-side economists
who believed that lower tax rates will increase the incentives to work, invest, and produce
supply-siders
fiscal and monetary policies are most effective in reducing inflation when the aggregate __ curve is __
supply; vertical
#35 ch. 18 hw
#35 ch.18 hw
if the average worker's productivity is $12 per hour and the labor force is employed for 600 billion hours, GDP is equal to
$7.2 trillion
equation for the tax elasticity of supply
% change in amt supplied / % change in tax rate
if real GDP rises from $700 billion to $704 billion, the economic growth rate is (equation)
($704 - $700) / $700
sources of productivity gains (3)
-more capital -technological advance -improved mangement
fiscal policy includes (3)
-tax cuts -tax increases -discretionary spending by the government
if a tax cut of 3% causes the output supplied to increase by 6%, the absolute value of the tax elasticity of supply is
2
year 2 year 3 -real GDP: $580 - real GDP: $605 -pop: 24 - pop: 25 the growth rate of the economy from year 2 to year 3 was
4.3%
tariffs and quotas on imported goods shift the __ curve to the __
AS; left
the best measure of living standards is
GDP per capita
what measures productivity
GDP per worker
a reduction in marginal tax rates will yield larger tax revenues if the
absolute value of the tax elasticity of supply is greater than 1.0
changes that are triggered by the economy and not by government decision makers is an example of
an automatic stabilizer
the time it takes for congress to deliberate over a specific fiscal policy action is an example of
an implementation problem
a rightward shift of long-run AS would most likely result from
an increase in labor skills
a leftward shift of AS could be caused by
an increase in the marginal tax rate
a decrease in marginal tax rates will cause __ in investment and a __ shift in AS
an increase; rightward
which of the following will occur because of a rightward shift of the philips curve -a rightward shift of aggregate demand -a decrease in both unemployment and inflation -a trade-off btwn unemployment and inflation -an outcome known as stagflation
an outcome known as stagflation
used for comparing the data for other years
base period
new classical economists differ from traditional classical economists because new classical economist
believe people's rational expectations will lead them to offset government policy
modern keynesians differ from traditional keynesians because modern keynesians
believe that monetary policy can be useful in managing the economy
specialization in production and then trading with other countries
change the mix out output for each country and increase total world output
a rightward shift in aggregate demand will cause an increase in output and no change in the price level if aggregate supply is
horizontal
the knowledge and skills possessed by the labor force
human capital
increased opportunities for trade increase production by
improving efficiency through specialization
advocates of "fixed policy rules" believe
in constant increases in the money supply and balanced federal budges
when the federal government runs a budget surplus, there may be a "crowding __" effect that contributes to the growth of __ capital investment
in; private
if an increase in government regulations causes the AS curve to shift to the left, the misery will
increase
what is a keynesian approach for dealing with a recession
increase government expenditure
if the absolute value of the tax elasticity of supply is 0.8, a tax decrease of 10% will
increase output by 8% and decrease tax revenues
tax credits for new investment are likely to
increase physical capital investment
assume the real U.S. GDP in 1997 was $7,269 billion and the U.S. population was 268 million, and the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million. from 1997 to 1998, the per capita real GDP
increased
supply-side policy to reduce inflation would focus on
increasing the incentives to produce goods and services
which of the following policies is a positive supply-side lever? -cutting the discount rate -increased government transfers -infrastructure development -increased government regulation of industry
infrastructure development
the "new growth theory" of economic growth emphasizes the importance of
investing in ideas
when one country can produce a given amount of a good using fewer inputs that any other country
it has an absolute advantage in producing the good
if the real GDP in Afghanistan grew at an annual rate of 1.5% and the country's population grew at an annual rate of 2.5%, how long would it take for GDP per capita to double
it will never double because population is increasing more rapidly than real GDP
what is a policy used to combat structural unemployment
job training programs
a horizontal aggregate supply curve below the level of full employment is most consistent with which view of the economy
keynesian
rightward AS shifts will cause __ philips curve shifts
leftward
a world view article titled "economic hit from japan quake seen up to $200 billion" implies that the most likely impact from power shortages from this destruction would be a __ shift of aggregate __
leftward; supply
if the number employed grows faster than the population, then the
living standard will rise
which of the following also occurs as the ppc shifts outward? -long-run AS incrases -GDP per capita remains constant -output decreases -the unemployment rate rises
long-run AS increases
an economy experiences economic growth whenever -nominal GDP rises -long-run real GDP rises -base-year GDP rises -the unemployment rate falls
long-run real GDP rises
when comparing the ration of trade to GDP, relative to other countries, the united states typically has
lower ratios for both imports and exports
by making infrastructure improvements, the government would change the misery index by
lowering the unemployment rate and lowering the inflation rate
open market operations is a __ policy action
monetary
employee benefits mandated by the government make it
more difficult to achieve full employment with stable prices
what is a major goal of short-run macroeconomic policy
move toward the ppc
what is both a supply-side and a fiscal policy tool during recession
tax cuts
what measures the growth rate of an economy
the % change in the real GDP from one period do another
which view of aggregate supply predicts that the outcomes of fiscal and monetary policy depend on how close the economy is to full employment
the hybrid view
the long-term rate determined by structural forces in labor and product markets
the natural rate of unemployment
two countries will have 0 incentive to trade if their ppcs are parallel straight lines because
the opportunity costs for both countries are the same
shows a historical (inverse) relationship btwn the rate of unemployment and the rate of inflation
the philips curve
monetary policy tools include (2)
the reserve ration and the discount rate
a movement up the ppc illustrates
the short-run opportunity cost of achieving long-run economic growth
a leftward shift in aggregate demand will cause a decrease in both output and price level if aggregate supply is
upward-sloping to the right
the number of times per year, on average, that a dollar is used to purchase final goods and services is the
velocity of money
