ECON Final 231

Fiscal policy refers to the:

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level

The American Recovery and Reinvestment Act of 2009 was implemented primarily to:

stimulate aggregate demand and employment.

Which of the following represents the most expansionary fiscal policy?

$10 billion increase in government spending

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. The budget deficit in year 3 is: Select one:

$100 billion.

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. The per unit cost of production in the economy described above is:

$2

Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the above information. The level of productivity is:

2

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Amount of real Price level Amount of real Output demanded Index Output Supplied $200. 300. $500 300. 250. 450 400. 200. 400 500. 150. 300 600. 100. 200 Refer to the above data. The equilibrium price level will be:

200

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 4 is the present year, the public debt as a percentage of GDP in year 4 is:

3.9 percent.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. A budget surplus occurred in year:

6

Which of the following would most likely shift the aggregate demand curve to the right?

An increase in stock prices that increases consumer wealth.

Menu costs:

are the costs to firms of changing prices and communicating them to customers.

The group of three economists appointed by the President to provide fiscal policy recommendations is the:

Council of Economic Advisers.

The public debt is held as:

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds

An appropriate fiscal policy for severe demand-pull inflation is:

a tax rate increase.

The aggregate demand curve is:

downsloping because of the interest-rate, real-balances, and foreign purchases effects

Discretionary fiscal policy is so named because it:

involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.

The economy's long-run aggregate supply curve:

is vertical

The political business cycle refers to the possibility that:

politicians will manipulate the economy to enhance their chances of being reelected.

Productivity measures:

real output per unit of input

A major advantage of the built-in or automatic stabilizers is that they:

require no legislative action by Congress to be made effective.

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along an upsloping AS curve.

Other things equal, an improvement in productivity will:

shift the aggregate supply curve to the right

The aggregate demand curve:

shows the amount of real output that will be purchased at each possible price level.

The aggregate supply curve (short-run):

slopes upward and to the right.

The public debt is the amount of money that:

the Federal government owes to holders of U.S. securities

Per-unit production cost is:

total input cost divided by units of output

The amount by which government expenditures exceed revenues during a particular year is the:

budget deficit

The amount by which Federal tax revenues exceed Federal government expenditures during a particular year is the:

budget surplus.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government Spending Tax Revenues GDP Year 1 $450 $425 $2000 Year 2 500 450 3000 Year 3 600 500 4000 Year 4 640 620 5000 Year 5 680 580 4800 Year 6 600 620 5000 Refer to the above data. If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is:

$275 billion.

What percentage of the average U.S. firm's costs are accounted for by wages and salaries?

75

An appropriate fiscal policy for a severe recession is

a decrease in tax rates

Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy Amount of real Price level Amount of real Output demanded Index Output Supplied $200. 300. $500 300. 250. 450 400. 200. 400 500. 150. 300 600. 100. 200 Refer to the above data. If the price level is 250 and producers supply $450 of real output:

a surplus of real output of $150 will occur

The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

determinants of aggregate demand.

The American Recovery and Reinvestment Act of 2009:

implemented a $787 billion package of tax cuts and government expenditure increases.

The determinants of aggregate supply:

include resource prices and resource productivity

Since 2002, the United States has had:

large Federal budget deficits

A contractionary fiscal policy is shown as a:

leftward shift in the economy's aggregate demand curve

Graphically, cost-push inflation is shown as a:

leftward shift of AS curve