EXAM 5

A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports . tight; stimulates; reduces loose; stimulates; reduces expansionary; reduces; stimulates contractionary; reduces; stimulates

A

A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following? an increase of 0.5-1.0% in the long-term interest rate long and variable time lags in enacting the fiscal policy smaller impact due to temporary fiscal policy output above the potential GDP output level

A

A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause: the exchange rate and the trade deficit to increase. the exchange rate and the trade deficit to decrease. the exchange rate to decrease and the trade deficit to increase. the exchange rate to increase and the trade deficit to decrease.

A

Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________. interest rates; right rates of return; left rates of return; right exchange rates; left

A

For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. swings in exchange rates trade-offs and risks foreign portfolio investment foreign direct investment

A

If Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result? its imports will increase its exports will increase aggregate demand will increase trade deficit will decrease

A

If an economy moves into a recession, causing that country to produce less than potential GDP, then: automatic stabilizers will cause tax revenue to decrease and government spending to increase. automatic stabilizers will cause tax revenue to increase and government spending to decrease. tax revenue and government spending will be higher because of automatic stabilizers. tax revenue and government spending will be lower because of automatic stabilizers.

A

Ricardian equivalence means that: changes in private savings offset any changes in the government deficit. changes in exports offset any changes in the government deficit. changes in imports offset any changes in the government deficit. changes in investment offset any changes in the government deficit.

A

When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? central bank prints more money increase in household savings decrease in borrowing by private firms foreign financial investors

A

When the interest rate in an economy increases, it is likely the result of either: a decrease in the government's budget surplus or an increase in its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. an increase in the government budget surplus or its budget deficit.

A

A ______________________ means that government spending and taxes are equal. fiscal budget balanced budget contractionary fiscal policy discretionary fiscal policy

B

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________. proportional tax rate corporate profits optional tax rate excise profits

B

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole. aggregate supply aggregate demand direct investments portfolio investments

B

People or firms use one currency to purchase another currency at the _______________________. international currency exchange foreign exchange market foreign currency exchange international parity market

B

The _____________________________ is the largest market in the world economy. international exchange market foreign exchange market foreign currency market international currency market

B

The current level of US government accumulated debt, when measured in nominal dollars: has reached higher levels in the past. is higher than it has ever been. is lower than it has ever been. has remained steady for the past decade.

B

The time lag for monetary policy is typically ________________ the time lag for fiscal policy. longer than shorter than about the same as the same as

B

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market. PPP soft peg hard peg currency

B

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. progressive tax regressive tax proportional tax estate and gift tax

C

A government began 2013 with a budget deficit and a trade deficit. During the year, the government changed its policy and is now running a budget surplus. If all other factors hold constant, this change in policy will cause: the exchange rate to decrease and the trade deficit to increase. the exchange rate to increase and the trade deficit to decrease. the exchange rate and the trade deficit to decrease. the exchange rate and the trade deficit to increase.

C

From a macroeconomic point of view, increases in ____________ are an addition to aggregate demand, while increases in ___________ are a subtraction from aggregate demand. rates of return; exchange rates exchange rates; rates of return exports; imports imports; exports

C

If David Ricardo's theory holds completely true, then any change in budget deficits or budget surpluses would be completely offset by which of the following? a change in currency exchange rates a sustained pattern of trade imbalances a corresponding change in private saving a dependence on inflows of capital

C

When the interest rate in an economy decreases, it is most likely as a result of: an increase in the government budget surplus or its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. a decrease in the government budget surplus or an increase in its budget deficit.

C

A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system. prolonged period of trade surpluses sustained pattern of large trade deficits prolonged period of budget surpluses sustained pattern of large budget deficits

D

A reduction in government borrowing can: decrease the incentive to invest. increase the interest rate. crowd out private investment in human capital. give private investment an opportunity to expand.

D

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________. contractionary fiscal policy; lead to a budget deficit discretionary fiscal policy; lead to a budget surplus contractionary fiscal policy; lead to a budget surplus expansionary fiscal policy; lead to a budget deficit

D

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________. distinctive trade-offs and risks exchange rate policy monetary policy the tools of demand and supply

D

From a macroeconomic point of view, which of the following is a source of demand for financial capital? savings by households and firms foreign financial investment domestic household private savings government borrowing

D

If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then: government spending and tax revenue will increase because of automatic stabilizers. government spending and tax revenue will decrease because of automatic stabilizers. automatic stabilizers will increase government spending and decrease tax revenue. automatic stabilizers will decrease government spending and increase tax revenue.

D

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. optional proportional progressive regressive

D