ECON 209 Module 7-10 Quizzes

Small macro disturbances can lead to much larger macro problems.

A basic conclusion of Keynesian analysis is that:

recession.

A decline in total output for two or more consecutive quarters is referred to as:

Left causing more undesired investment.

A decrease in sales expectations may shift the AD curve to the:

Non-interference by the government.

A laissez faire policy approach during a recession would advocate:

Much aggregate demand.

According to Keynes, demand-pull inflation is caused by too:

Decrease government purchases.

According to Keynes, which of the following can be used to slow down an overheated economy?

Macroeconomic goals are achieved.

According to Keynesian theory, which of the following is not true at macro equilibrium?

Aggregate supply equals aggregate demand.

According to the Keynesian view of the macro economy, which of the following is always true at equilibrium?

Will increase total spending because the effect of the extra government spending is larger than the effect on consumer spending.

According to the balanced budget multiplier, a pay-as-you-go (balanced) budget initiative:

Is the total quantity of output demanded at alternative price levels.

Aggregate demand:

The result of recurrent shifts of aggregate demand and aggregate supply.

Alternating periods of economic growth and contraction are:

The business cycle.

Alternating periods of economic growth and contraction in real GDP define:

An injection.

An addition of spending to the circular flow of income is:

Much smaller than the eventual decline in spending.

An initial (autonomous) decrease in aggregate demand will likely be:

Tight supplies of factors of production.

As output rises, the cost effect results from:

Be caused by increases in induced expenditures.

Assume a decrease in interest rates causes an initial increase in desired investment and aggregate demand. Additional increases in aggregate demand will:

Increase spending by $50 billion.

Assume the MPC is 0.75. To eliminate an AD shortfall of $200 billion, the government should:

An amount greater than the recessionary GDP gap because the spending increase raises the price level.

Assume the equilibrium level of output is less than full employment. To achieve a full-employment equilibrium the aggregate demand curve must shift to the right by:

Saving plus taxes is greater than investment plus government spending.

Assume there is no foreign trade and the economy is in equilibrium. If actual investment is greater than desired investment then it is most likely that:

Increases and the price level decreases.

Assuming an upward-sloping aggregate supply curve, when aggregate demand decreases, unemployment:

Decreases and the price level increases.

Assuming an upward-sloping aggregate supply curve, when aggregate demand increases, unemployment:

$50 billion.

At full employment in Figure 9.8, how much saving is there?

$100 billion.

At full employment in Figure 9.8, there is a recessionary gap equal to:

Increase spending during recessions and reduce spending during inflationary periods.

Automatic stabilizers tend to stabilize the level of economic activity because they:

Government spending by less than $600 billion.

Ceteris paribus, if the AD shortfall equals $600 billion, then the federal government can close it by increasing:

Demand curve shifts to the left.

Ceteris paribus, the price level will decrease if the aggregate:

Account for over two-thirds of total spending.

Consumption expenditures:

Full employment.

Crowding out is complete only when the economy is experiencing:

Borrows, making it more difficult for the private sector to borrow.

Crowding out occurs when the government:

Finances expenditures that exceed tax revenues.

Deficit spending results whenever the government:

Purchases of new plant and equipment plus desired changes in business inventories.

Desired investment equals:

Shifts of the AD curve.

Fiscal policy works primarily through:

Get consumers to spend more on goods and services.

From a Keynesian perspective, the way out of recession is to:

At full employment.

Full employment GDP is the value of total output produced:

Decrease, but the price level may increase, decrease, or stay the same.

If aggregate demand decreases and aggregate supply decreases, the level of real output will:

A recessionary GDP gap will still exist.

If aggregate demand increases by the amount of the recessionary GDP gap and aggregate supply is upward sloping:

MPC is 0.90.

If consumers spend 90 cents out of every extra dollar received, the:

lower price level and a higher level of output.

If full employment is greater than the macro equilibrium, which of the following best describes the impact of a rightward shift of the aggregate supply curve, ceteris paribus?

The economy will expand.

If injections exceed leakages:

Income will fall until planned leakages equal planned injections.

If planned leakages exceed planned injections, then Keynesians believe:

$160 billion.

If the MPC equals 0.80, a $200 billion tax decrease will increase consumption in the first round by:

$1,200 billion.

If the MPC is 0.60 and disposable income increases from $20,000 billion to $22,000 billion, then consumption will increase by:

$1,250.

If the MPC=0.60, the total change in spending resulting from an initial $500 decrease in aggregate spending will be:

Income will increase by the amount of the increase in government spending.

If the government increases spending and maintains a balanced budget at the same time:

2.50

If the marginal propensity to consume is 0.60, then the multiplier equals:

$3 million.

If the multiplier equals 2 and the AD shortfall is $6 million, then the desired fiscal stimulus is:

Government spending decreased by $125 million.

If the multiplier is 4 and a change in government spending leads to a $500 million decrease in aggregate demand, we can conclude that:

MPC is 0.88.

If, in the aggregate, consumers spend 88 cents out of every extra dollar received, the:

25 percent.

In 1933, the U.S. unemployment rate was approximately:

Rise as a result of undesired investment.

In Figure 9.8 if full-employment income is produced, we can expect inventories to:

Horizontal distance between the aggregate demand curve necessary for full employment and the aggregate demand curve at the equilibrium price.

In a diagram of aggregate demand and supply curves, the AD shortfall is measured as the:

Growth recession.

In which of the following situations is the percentage change in real GDP always positive?

A leakage.

Income not spent directly on domestic output is:

Exports.

Injections include:

Macro failure is likely to occur and it isn't likely to go away.

John Maynard Keynes argued that:

Caused recurring business cycles.

Keynes believed that abrupt changes in spending behavior:

Neither full employment nor price stability.

Keynes was concerned that at macroeconomic equilibrium the economy would experience:

And price stability might not continue.

Keynes was concerned that at macroeconomic equilibrium, full employment:

Fiscal and monetary policy.

Keynesian levers would include:

Consumer saving.

Leakages include:

Money and credit controls to alter macroeconomic outcomes.

Monetary policy is the use of:

A decrease in aggregate demand.

One In the News article is titled "Slack Demand Hinders Economy." This implies that there has been:

Were producing inside their production possibilities curves.

One World View article states "The Great Depression was not confined to the U.S. economy." This implies that many other countries:

Point c.

Refer to Figure 11.1. Assume aggregate demand is initially represented by AD1 and full employment output is $6.0 trillion. If aggregate demand increases by the amount of the GDP gap, equilibrium will occur at:

$5.8 trillion.

Refer to Figure 11.1. Assume aggregate demand is represented by AD1 and full employment output is $6.0 trillion. The equilibrium level of income is:

0.15.

Suppose a consumption function is given as C = $175 + 0.85YD. The marginal propensity to save is:

$1,000

Suppose the consumption function is C = $100 + 0.75YD. Savings will be $150 if the level of disposable income is:

$1,000 billion.

Suppose the consumption function is C = 100 + 0.90YD. If the government stimulates the economy with $100 billion in increased government purchases, aggregate expenditure will rise by:

Was ended by massive government spending during World War II.

The Great Depression in the United States:

Cost effect.

The aggregate supply curve is upward-sloping because of the:

Marginal propensity to consume.

The amount of additional income generated by increased government spending depends on the:

An increase in government spending paid for by a tax cut of equal size shifts aggregate demand rightward.

The balanced budget multiplier says that:

The sale of bonds by the federal government will raise interest rates and cause firms to invest less.

The concept of crowding out refers to the idea that:

Recessionary GDP gap.

The difference between full-employment GDP and equilibrium GDP is the:

70 percent.

The disposable income consumers receive is equal to about what percentage of total income?

The change in consumption divided by the change in disposable income.

The marginal propensity to consume is:

The fraction of each additional dollar of disposable income spent on consumption.

The marginal propensity to consume is:

The Great Depression.

The most prolonged departure from the long-term growth path for the United States occurred during:

Investment and saving.

The primary source of macro instability, when there is no government and no foreign trade, is the relationship between:

Value of the goods and services that could be produced but were not due to unemployed resources.

The recessionary GDP gap represents the:

Federal revenues at full employment minus federal expenditures at full employment under current fiscal policy.

The structural deficit represents:

Cyclical changes and changes in discretionary fiscal policy.

The two components responsible for the total budget balance reflect:

Macro equilibrium.

The unique situation in which the behavior of buyers and sellers is compatible is referred to as:

Deficit spending.

The use of borrowed funds to finance government expenditures that exceed tax revenues is:

Fiscal policy.

The use of government taxes and spending to alter economic outcomes is known as:

Smaller the slope of the savings function.

The value of the multiplier will be larger the:

$25 billion.

To eliminate an AD shortfall of $100 billion when the economy has an MPC of 0.80, the government should increase transfer payments by:

Cyclical.

When aggregate expenditures fall below the full-employment level of output, which of the following types of unemployment is most likely to increase?

A decrease in the deficit during an expansion.

Which of the following is a possible effect of automatic stabilizers on the federal budget?

Classical economics failed to explain a prolonged depression.

Which of the following is a situation in which economic theory failed to explain a change in the economy?

The real GDP gap.

Which of the following is eliminated when the economy's output is equal to full-employment GDP?

How total quantity of output demanded varies with the average price level.

Which of the following is illustrated by the aggregate demand curve?

Disposable income.

Which of the following is not a determinant of autonomous consumption?

Real GDP.

Which of the following is not a determinant of autonomous consumption?

Defense spending.

Which of the following is not an automatic stabilizer?

The real balance effect.

Which of the following is not associated with the aggregate supply curve?

It is shown graphically with a curve that is upward sloping to the right.

Which of the following is not true about aggregate demand?

The economy is working beyond normal capacity.

Which of the following is true if equilibrium exceeds full employment?

Inflationary gap.

Which of the following occurs when the spending on final goods and services exceeds full-employment GDP?

Greater government expenditure and lower taxes.

Which of the following policies will definitely increase the budget deficit, while achieving greater fiscal stimulus?

High inflation.

Which of the following was not characteristic of the U.S. economy during the Great Depression?

Real GDP increased.

Which of the following was not characteristic of the U.S. economy during the Great Depression?

Unemployment reached 50 percent.

Which of the following was not characteristic of the U.S. economy during the Great Depression?

An increase in foreign consumer income.

Which of the following will cause an increase in U.S. gross exports?

An increase in foreign wealth.

Which of the following will cause an increase in U.S. gross exports?

Reduced expectations of future sales.

Which of the following will cause the investment function to shift to the left?

A decrease in business taxes.

Which of the following will cause the investment-demand curve to shift to the right?

An improvement in technology.

Which of the following will cause the investment-demand curve to shift to the right?

A decrease in U.S. imports.

Which of the following will not cause an increase in U.S. gross exports?

John Maynard Keynes.

Who believed that disturbances in output, prices, or unemployment were capable of being magnified in the aggregate economy?

John Maynard Keynes.

Who believed the government could "prime the pump" when the economy falters?

The rising costs associated with increased capacity utilization.

A positively sloped aggregate supply curve reflects:

Horizontal distance between full-employment GDP and equilibrium GDP.

A recessionary GDP gap is the:

Deflation and a lower unemployment rate.

A rightward shift in the aggregate supply curve should result in:

Contains less fiscal stimulus than an increase in government spending of the same size.

A tax cut:

Unemployment.

When unwanted inventories pile up in retail stores, retail managers will take actions that lead to greater:

Demand shifts to the right and supply shifts to the right.

Which combination of shifts of aggregate demand and supply would definitely cause an increase in real GDP?

Tax revenues fall short of expenditures over the fiscal year.

Which of the following describes a budget deficit?

Supply-side.

Which of the following economic perspectives focuses on the need for government to shift aggregate supply to correct problems of unemployment and inflation?

Disposable income.

Which of the following forces did Keynes assert had the strongest influence on consumption decisions?