ECON Exam

Using Figure 11.1, which fiscal policy action would increase aggregate demand from AD1 to AD3?

A decrease in taxes

Which of the following is included in the labor force?

A part-time store clerk who is looking for another job

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

A recession

Which of the following is not a transactions account?

A savings account

Increases in difference spending may be accompanied by

A shift of the aggregate demand curve to the right

A technological advance would best be represented by?

A shift outward of the production possibilities curve

If a price is below equilibrium?

A shortage will cause the price to rise and the quantity supplied to increase.

Expansionary monetary and fiscal policies are designed to move the economy in Figure 17.1, in the short run, from point

A to point D

When we calculate GDP, imports are?

A. Subtracted from total spending because they are part of another country's GDP.

According to supply-side theorists, taxes

Alter disposable income and affect the incentives to work and produce.

If a country engages in trade with other countries, it is known as:

An open economy

inflation means

Average prices are rising, but it is not certain what is happening to relative prices.

The incentives that encourage businesses to purchase more capital goos could result in a long-run movement in figure 17.4

B to point C

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

Horizontal distance between the aggregate demand curve necessary for full employment and the aggregate demand curve that intersects AS at the equilibrium price

Economics can be defined as the study of

How scarce resources are allocated.

The primary function of taxes is to?

Transfer command over resources from the private sector to the public sector

Which of the following groups believes that the private sector takes actions based on rational expectations to offset policy actions?

New classical economists

Many economic policies fail for all of the following reasons except

Politicians and economists work together in formulating policies

In a market economy, which of the following is an incentive for producers to produce efficiently?

Profits

Desired investment occurs

Purchases of unemployment and equipment plus desired changes in business inventories

Crowding out is most likely to occur when the federal government

Runs a deficit and sells bonds to make up the difference

Monetary stimulus will fail if

Short-term interest rates are affected but long-term interest rates are not.

To reduce the level of unanticipated inflation, monetarists advocate

Steady and predictable changes in the money supply

Long-term charges in demand that make some goods obsolete (possibly due to technological advancement) are likely to have their greatest impact on?

Structural Unemployment

The only policy lever that is effective against unemployment when the AS curve its vertical is

Supply-side policy

A rightward shift in aggregate demand will cause an increase in output and price level if aggregate supply is

Upward-sloping to the right

Money allusion is the

Use of nominal dollars rather then real dollars to gauge changes in one's income or wealth

An externality affecting demand can be measured graphically as the

Vertical distance between the market demand curve and the social demand curve

Which of the following contributes to the high productivity of American workers?

The abundance of capital relative to labor

A shift from LRAS1 to LRAS2 in Figure 17.6 indicates that

The capacity of the economy has increased

Efforts to fine-tune the economy have been used for several decades, and since then

We still experience periods of recession, high unemployment, and inflation

The effect of monetary policy is greatest

When investment demand becomes more responsive to changes in the interest rate

Factor mobility refers to

The ease of reallocating resources

Full-employment in the U.S. economy means that

The economy has reached the lowest level of unemployment compatible with price stability

same as 63

same as 63

Which of the following is included in M2?

savings accounts

The term externalities refers to

The negative costs and positive benefits of a market activity borne by a third party.

To achieve large and lasting increases in output

The production possibilities curve must shift outward

What impact do transfer payments have?

They reduce the incentive to work and shift AS to the left.

Suppose a bank has $160,000 in deposits and a required reserve ratio of 10 percent. Then required reserves are

$16,000

If the economy is 0.90, a $4 billion increase in taxes will ultimately cause consumption to decrease by

$36 billion

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent. Then required reserves are

$45,000

Corporations in the United States spend a lot of money to familiarize management with global markets. This should

(didnt get answer but its not 'have no effect...', 'move the economy...', and 'shift the economy's...')

The money supply M2 includes M1

Plus balances in savings accounts and money market mutual funds.

Increased investment in infrastructure will shift

Both the aggregate supply and aggregate demand to the right.

A decrease in the price of bubblegum below equilibrium will?

Cause a shortage of bubblegum

Which f the following is an example of an automatic stabilizer?

Changes that are triggered by the economy and not by government decision makers

Regional Fed banks

Clear checks between private banks.

When a bank makes a loan, it

Creates a transactions account balance for the borrower.

A leftward shift of market demand curve of HDTV's, ceteris paribus, causes equilibrium price too?

Decrease and quantity to decrease

A decrease in the marginal propensity to save is likely to

Decrease physical capital investment

Aggregate demand is the total quantity of output

Demanded at alternative price levels in a given time period.

The desired tax cut to close a GDP gap is given by

Desired fiscal stimulus ÷ MPC.

Fiscal policy includes:

Discretionary government spending

Politicians might hesitate to increase income and in-kind transfers to the poor because this could cause

Excessive demand for goods and services

The governments role in limiting smoking in many buildings is justified by considerations of?

Externalities

Capital, as economists use the term, refers to

Final goods that are used to produce other goods and services

The natural rate of unemployment includes

Frictional and structural unemployment only.

Suppose the required reserve ratio is 20 percent, and the Fed buys $1 million worth of bonds from the public. If the public deposits this amount into transaction accounts, the money supply will

Increase directly by $1 million in reserve deposits, with an additional lending capacity of $4 million created for the banking system

If a country moves from a point below the production possibilities curve to a point on the curve, it is experiencing

Increased capacity utilization

When the Fed buys bonds from the public, it

Increases the flow of reserves to the banking system.

According to supply-side theory, which of the following would cause a leftward shift in the aggregate supply curve?

Increasing aggregate regulations

According to Keynes, unemployment results from?

Insufficient spending on the part of consumers, business, and government.

The federal funds rate is the interest rate for

Interbank reserve loans.

A recessionary gap

Is the amount by which the rate of actual spending falls short of full-employment GDP.

The GDP deflator

Is the broadcast price index, covering all output

The basic factors of production are?

Land, labor, capital, and entrepreneurship

(didn't get question)

Lead to a high rate of inflation

According to Keynes, cyclical unemployment is caused by too

Little aggregate demand

In order to increase the money supply, the Fed can

Lower the reserve requirement, decrease the discount rate, or buy bonds.

The M2 money supply is defined as

M1 plus balances in most savings accounts and money market mutual funds

John Maynard Keynes argued that

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

If the market wage for fast-food restaurants is $11 and the government enforces a minimum wage of $7, the unemployment rate will

Not be affected by the minimum wage

Which determinant of demand changes in the personal computer market as more individuals become interested in 'surfing the internet'?

Number of Buyers

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 opportunity cost relative to the United States

Which of the following is an example of supply-side policy?

Tax incentives for business investments

The marginal propensity to consume is

the fraction of each additional dollar of disposable income spent on consumption

Value added is the

the increase in the market value of a product that takes place at each stage of the production process

Debt ceilings are designed to

to reduce the deficit

A movement up the Phillips curve will cause

trade off between unemployment and inflation