MACRO Exam 3

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The fraction, or percentage, of total income which is consumed is called the:

Average propensity to consume

The intent of contractionary fiscal policy is to:

Decrease aggregate demand

The Great Recession of 2007-2009 alter the prior behavior of consumers in the economy by

Shifting the consumption schedule down

In the aggregate demand - aggregate supply model, the economy's price level is assumed to be:

Variable, unlike in the aggregate expenditures model

In the aggregate expenditures model, the consumption schedule is shown to be

directly related to real income GDP

The relationship between the MPS and the MPC is such that:

1-MPC=MPS

In a private closed economy, the two components of aggregate expenditures are:

Consumption and investment

Discretionary fiscal policy is often initiated on the advice of the

Council of Economic Advisors

If the dollar depreciates in value relative to foreign currencies, then aggregate:

Demand increases

The amount of consumption in an economy correlates:

Directly with the level of disposable income

If the government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the:

Economy's MPS is small

Whe the federal government uses taxation and spending actions to stimulate the economy it is conducting

Fiscal policy

In a private closed economy, there will be an unplanned increased in inventories when:

GDP exceeds aggregate expenditures

A federal budget deficit is financed by the:

Government issuance or sale of Treasury securities

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy:

Is not subject to the timing problems of discretionary policy

A change in interest rates would shift the consumption schedule and the savings schedule BLANK; a change in taxes would shift these two schedules BLANK

In the opposite directions; in the same direction

The so-called paradox of thrift that became quite obvious in the great recession of 2007-2009 refers to all of the following except

In trying to spend less now, consumers will end up spending more later on

The aggregate demand curve shows the:

Inverse relationship between the price level and the quantity of real GDP

In the aggregate expenditure model, which variable is assumed to be independent of real GDP

Investment

If the expected rate of return on investment decreases, than most likely the:

Investment schedule will shift downward

One of the potential consequences of the public debt is that it may:

Lead to additional future taxes that reduce economic incentives

An increase in personal income taxes would shift AD to the:

Left because C will decrease

When a consumption schedule is plotted as a straight line, the slope of the line is:

Less than the slope of the 45 degree line

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called:

Nondiscretionary fiscal policy

The aggregate demand curve of schedule shows the relationship between the total demand for output and the:

Price level

The crowding-out effect from government borrowing to finance the public debt is reduced when:

Public investment complements private investment

The paradox if thrift highlights the idea that:

Saving more can be bad for the economy during a recession

When the price level decreases:

The demand for money falls and the and interest rate falls

Which of the following is graphed as a horizontal line across level of real GDP in the aggregate expenditures model

The investment schedule

The slope of the consumption schedule between two points on the schedule is:

The ratio of the change in consumption to the change in disposable income between those two points

When the dollar appreciates relative to foreign currencies, it means that:

The values of foreign currencies decreased relative to our dollar

When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are designed to be:

countercyclical


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