MT 4/5 Econ 2105
The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.
by more than
The national debt is the amount
by which government outlays exceed tax revenue in a given year.
To evaluate relative changes in the net public debt, we must
compare it to the nation's real GDP
If the economy's full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a
cyclical deficit.
From an initial long-run equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate supply, then Congress and the president would most likely
decrease taxes.
When a nation starts importing a good or service, domestic employment in that industry
decreases
When government outlays exceed tax revenues, the situation is called a budget
deficit
Since 2000, the U.S. government has generally had a government budget ________ and so the national debt has ________.
deficit; increased
Time lags that often erode effectiveness of monetary and fiscal policy measures represent
delays in the response of the economy to stabilization policy.
When the United States exports goods and services to France, there is an increase in the
demand for dollars.
If the dollar's value changes from 120 yen per dollar to 110 yen per dollar, the dollar has
depreciated
Today, one U.S. dollar exchanges for 1.10 euros. The next morning the same dollar exchanges for 1.07 euros. We can conclude that the dollar has ________ and the euro has ________.
depreciated; appreciated
Figure 7-1 shows the U.S. demand and supply for leather footwear.Refer to Figure 7-1. Under autarky, the equilibrium price is
$30
According to the above table, the country will import the good if the world price is less than ________ and will export the good if the world price is more than ________.
$6; $6
In 2008, the Treasury and Federal Reserve took several actions in response to the deepening financial crisis. One action was the Treasury's move to have the federal government take control of
Fannie Mae and Freddie Mac.
Which of the following statements is false?
If Japan imposes a subsidy on car exports to the United States, the price of cars in the United States is likely to increase.
The current account does not include which of the following?
U.S. holdings of foreign assets
Who gains from international trade?
both the importing and the exporting nations
When unemployment is below its natural rate, the inflation rate will eventually
increase
If the United States decreases the tariff on imported tuna steaks, this will
increase the number of tuna steaks imported in the United States and reduce the production of tuna steaks in the United States.
Table 2-4 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. Refer to Table 2-4. What is Jack's opportunity cost of cultivating a garden?
one and a half lawns mowed
Refer to Table 2-4. What is George's opportunity cost of mowing a lawn?
one-half of a garden cultivated
Which of the following is true? i.Comparative advantage drives international trade. ii.Compared to a no-trade situation, imports make domestic producers better off. iii.Tariffs lower the domestic price of imported goods.
only i.
Of the three primary tools the Federal Reserve uses to conduct monetary policy, the tool used most often is
open market operations.
If the income from investments by Americans abroad exceeds the income from investments by non-Americans in the United States, then net income from abroad is
positive
The quantity of U.S. dollars supplied in the foreign exchange market is
positively related to the exchange rate.
Suppose the Fed pursues a policy that leads to higher interest rates in the United States. How will this policy affect real GDP in the short run if the United States is an open economy? This policy
reduces investment spending, consumption spending and net exports, all of which reduce GDP.
Dumping refers to
selling a product for a price below its cost of production.
If the economy is in a recession, the full-employment deficit is ________ the actual deficit.
smaller than
Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic
stabilizers.
When we keep part of our wealth in a bank checking account, we are using money as a
store of value.
If the federal government has a budget surplus, then it is definitely the case that
tax revenues exceeds government outlays.
The structural deficit is the deficit
that would occur at full employment
The structural deficit is the deficit
that would occur at full employment.
What two measures of macroeconomic activity are often referred to as the "twin deficits"?
the budget deficit and the current account deficit
When the United States sends money to Indonesia to help tsunami survivors, in what account is this transaction recorded?
the current account
A flexible exchange rate between two countries is determined by
the demand and supply of both countries' currencies
When the market value of the dollar rises relative to other currencies around the world, we say that
the dollar has appreciated.
For the federal deficit to be lowered
the federal government's expenditures must be lower than its tax revenue.
If the current account is in deficit, we know that
the financial account is in surplus.
The use of fiscal policy to stabilize the economy is limited because
the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way.
The recognition lag of stabilization policy represents
the time that it takes for policy makers to recognize a change in the economy
Which of the following creates a demand for U.S. dollars?
Toyota, a Japanese firm, purchasing land in Texas
The United States is called a debtor nation because
it has a large current account deficit and is simultaneously funded by foreign investment.
Which of the following would not be considered an automatic stabilizer?
legislation increasing funding for job retraining passed during a recession
When tax revenues ________ outlays is positive, then the government has a budget ________.
minus; surplus
The ratio of the change in the equilibrium level of output to a change in some autonomous variable is the
multiplier
The structural deficit or surplus is the
government budget deficit or surplus that would occur if the economy were at full employment.
An increase in government purchases will increase aggregate demand because
government expenditures are a component of aggregate demand.
If the federal government ________ during the financial crisis of 2008-2009, the fall in overall stock prices would likely have been larger.
had not bailed out the large financial institutions
Which of the following is an objective of fiscal policy?
high rates of economic growth
Refer to the information provided in Table 18.4 below to answer the questions that follow.Table 18.4 GermanyChile BeerWineBeerWine (cases)(cases)(cases)(cases) 75 0 30 0 60 15 24 12 45 30 18 24 30 45 12 36 15 60 6 48 0 75 0 60
1 case of beer
Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts.Refer to Figure 2-8. What is the opportunity cost of producing 1 ton of coconuts in Guatemala?
1/2 of a ton of pineapples
Table 2-7 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas.Refer to Table 2-7. What is Minnie's opportunity cost of making a hat?
1/4 of an umbrella
Refer to Figure 18-1. Italians cut back on smoking and cut their demand for American cigarettes in half. Assuming all else remains constant, this would be represented as a movement from
B to A.
Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered, as is what happened in the United States in 1849. If the economy is at full employment, what should this discovery do?
It should raise the money supply and cause inflation.
Which of the following would be classified as fiscal policy?
The federal government cuts taxes to stimulate the economy.
Historically, the largest U.S. federal budget deficits as a percentage of GDP in the 20th century occurred during
World War I and World War II.
National debt decreases in a given year when a country has
a budget surplus.
In 2009, Congress passed tax laws to reduce income tax rates for some taxpayers. This action is called
a discretionary fiscal policy
One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost than firms in other nations in the production of such aircraft.
a lower
Which of the following is not included in the balance of the financial account of the United States?
a purchase of German legal services by Chase Manhattan Bank
If the economy is in equilibrium with real GDP less than potential GDP, there is ________ gap, and a fiscal policy that ________ is appropriate.
a recessionary; increases aggregate demand
Refer to Table 2-1. Assume Dina's Diner only produces sliders and hot wings. A combination of 40 sliders and 50 hot wings would appear
along Dina's production possibilities frontier.
The time it takes the Fed or Congress to change economic policy is
an implementation lag.
In an expansion, federal tax revenues increase proportionally more than real GDP without the need for any government policy. This increase is an example of
automatic fiscal policy
The record of a country's transactions in goods, services, and assets with the rest of the world is its
balance of payments
Refer to Table 2-1. Assume Dina's Diner only produces sliders and hot wings. A combination of 40 sliders and 25 hot wings would appear
inside Dina's production possibilities frontier
The government expenditure multiplier and the tax multiplier are
different in size and the government expenditure multiplier is larger.
When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________ because ________.
does not change; both currency and checkable deposits are included in M1
Autarky is a situation in which a country
does not trade with other countries
The currency adopted by most countries in Western Europe is referred to as the
euro
Exchange rates that are determined by the unregulated forces of supply and demand are
floating exchange rates.
Other things remaining the same, as U.S. imports increase, the quantity of
foreign currency demanded increases.
The multiplier effect refers to the series of
induced increases in consumption spending that result from an initial increase in autonomous expenditures