MACRO FINAL PART 4

In the short run, wages and some prices are considered to be:

sticky.

(Figure: Short-Run Equilibrium) If the economy is at equilibrium at Y1and P1, it is in a(n):

inflationary gap.

All of the following are sources of federal tax revenue EXCEPT:

sales taxes.

(Figure: Short-and Long-Run Equilibrium) Using the accompanying figure, which of the following would be the appropriate response of the government upon viewing the state of the economy?

Expand aggregate demand by cutting taxes to close the recessionary gap.

Which of the following is a government transfer?

Social Security payments to retired auto workers

(Figure: Short-Run Equilibrium) The accompanying graph shows the current short-run equilibrium in the economy. Appropriate fiscal policy action in this situation would be:

a decrease in transfer payments.

The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve:

a downward slope.

The aggregate supply curve shows the relationship between the aggregate price level and:

aggregate output supplied.

Which of the following would likely cause the short-run aggregate supply curve to shift to the left?

an increase in the price of imported oil

The aggregate supply curve shows the relationship of prices:

and the output producers are willing to provide.

Which of the following is NOT a method of fiscal policy?

changes in the money supply

Suppose the economy is in an inflationary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:

decrease government purchases.

Suppose the economy is in a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:

decrease taxes.

The short-run aggregate supply curve is positively sloped because:

higher prices lead to higher profit and higher output.

The point where the long-run aggregate supply curve intercepts the horizontal axis:

is the economy's potential output.

In the long run, the aggregate price level has:

no effect on the quantity of aggregate output.

If the economy is at equilibrium above potential output:

there is an inflationary gap, and contractionary fiscal policy is appropriate.

Medicaid, Medicare, and Social Security are examples of:

transfer payments.