Exam 3 Study Guide
An increase in input prices will cause
AS to decrease (move to up and to the left)
An increase in regulation will cause
AS to decrease (move to up and to the left)
Which of the following can make the unemployment rate rise?
An increase in the number of people who are looking for work and a decrease in the number of people with jobs
Which of the following would be an example of non-discretionary fiscal policy at work in 2001 through 2003
The increase in unemployment compensation payments in 2001 through 2003
Use the Aggregate Supply-Aggregate Demand model to determine which of the following will lead to higher aggregate output.
a cut in interest rates
The Federal Reserve has indirect control over short term interest rates and as a result their ability to control economic activity is through
aggregate demand
A decrease in confidence will immediately shift
aggregate demand to the left
An increase in input prices will
aggregate supply to the left
A decrease in government regulation will shift
aggregate supply to the right
Authorization in 2009 of increased federal spending on "shovel-ready" infrastructure projects was intended to speed up the macroeconomic impact of the deficit spending by
avoiding the lengthy design phase of the projects
Attempts in 2008 to jump-start the economy on the demand side included a large
cut in short-term interest rates
The use of a backward-L shaped aggregate supply curve allows us to ________ in a way that other shapes would not.
deal with shifting curves
Suppose the Federal Reserve wanted to fight inflation by increasing interest rates. Doing so would
decrease aggregate demand
Policies focused on putting people to work by having them construct parks would be considered
demand side policies
The Bush tax cuts of 2001 are an example of
discretionary (and expansionary) fiscal policy
Critics of the Obama stimulus plan were
from both conservatives and liberals
Since the end of World War II, the rate of growth during expansions
has been falling
A reason given why the CPI overstates the cost of living is it
inadequately deals with updates in product lines for existing goods
Over the years the consequences of the biased-measurement of the CPI
increase exponentially
Suppose there are only two goods (Good A and Good B) and the average person buys 4 of Good A in a year and 3 of Good B. If, in the base year, the price of Good A is $5 and the price of Good B is $10, and in the next year the price of Good A is $6 and the price of Good B is $9, the price index in the second of the two years
is 102
Suppose there are two good types (Type 1 and Type 2) and suppose the weights for the types are 80% for Type 1 and 20% for Type 2. Suppose the Price Index for Type 1 is 125 and the Price Index for Type 2 is 120. The overall price index
is 124
One problem with using Real Gross Domestic Product as a measure of social welfare is that
it fails to count home production
As women entered the force in the 1950s through the 1990s, the
labor for participation rate steadily rose
If the inflation rate turns out to be less than what is expected to be, the clear losers are
lenders
The operational lag seemingly did not apply in the case of the 2003 tax cut because it took
only a month or two from the passage of the 2003 tax cut to the issuance to rebate checks
A political problem with discretionary fiscal policy is the
political business cycle
A recent example of the administrative lag came in the form of it taking
several months in 2003 for Congress to agree on a specific tax cut package even after they had agreed on having one.
In 2005, General Motors announced a 20% reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified as
structurally unemployed
When domestic prices rise
the buying power of cash assets falls
Discretionary fiscal policy differs from non discretionary fiscal policy in that
the former requires timely decisions whereas the latter is built into the system.
An example of non discretionary fiscal policy would be
the operation of the welfare state
If you were to use an Aggregate Supply Aggregate Demand diagram to model non discretionary and discretionary fiscal policy in reaction to a positive aggregate demand shock, you would see the aggregate demand curve move
to the right, back toward its pre-shock position as a result of these policies
The rationale for exchange rates determining AD is with
weaker dollar imports will fall AD will rise
With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, the "discouraged worker effect" would be illustrated by people in the
8 million giving up in their search for work
The political problems associated with fixing the CPI are that
Social Security benefits would fall
How does GDP deal with a Toyota produced in Kentucky?
It is fully counted
