Chapter 12

Consumption, investment, government spending, exports, and imports are:

all components of aggregate demand.

According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions.

coordination

If markets throughout the global economy all have flexible and continually adjusting prices, then:

each economy will trends towards its natural rate of unemployment.

Refer to the graph shown below. At point B:(Graph Inflation on vertical axis and unemployment on vertical axis with a downward slope with point A at top of horizontal axis point c curving down and point B at the outward corner end of vertical axis)

economic growth it low or even negative.

According to the Keynesian framework, ________________________ may cause a recession, but not inflation.

a major trading partner's economic slowdown

The equilibrium quantity of labor increases and the equilibrium wage decreases when:

labor supply shifts to the right, if wages are flexible,

Aggregate demand is more likely to _________________ than aggregate supply in the short run.

shift substantially

Which of the following is a distinguishing characteristic of a Keynesian cross diagram?

45-degree line

The equilibrium quantity of labor decreases and the equilibrium wage increases when:

labor supply shifts to the left, if wages are flexible.

According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation?

A)an increase in military spending Correct Answer B B) a decrease in military spending C) increase in spending by the government on health care D) decrease in business taxes

Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle?

Out of 100 increasing in spending 60 will be back into purchase. Therefore, the saving is (using the equation-renderer below) = 100-60 =40% and consumption =60% the vlaue recylced in the next round = first round purchaseX consumption rate =60x60% =60 x (60/100) =36

In macroeconomics, a _________________ is used to show the relationship between inflation and unemployment in the short run.

Phillips curve

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is supported by the:

Phillips curve tradeoff.

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?

The correct answer is 750. To calculate the increase in output, we can use the formula: Increase in output = Multiplier * Increase in government spending Given that the multiplier is 3 and the government increases spending by 250, we can substitute these values into the formula: Increase in output = 3 * 250 = 750 Therefore, the output will increase by 750.

According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?

an increase in taxes on business investments

According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession.

an increase; domestic investment

If a Keynesian expenditure-output model shows that aggregate demand for both goods and labor has shifted to the left while wages and prices are unchanged, what will be the result?

excess supply in the goods market and excess supply in the labor market

According to the Keynesian framework, _______________ will not help reduce inflation, but may help a country get out of a recession.

increased spending by the government on health care

In a Keynesian cross diagram, what name is given to the distance between an output level that is above potential GDP and the level of potential GDP?

inflationary gap

If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:

is producing at a point where output is less than potential GDP.

If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy:

is producing at a point where output is more than potential GDP.

The equilibrium quantity of labor and the equilibrium wage level decrease when:

labor demand shifts to the left, if wages are flexible.

The equilibrium quantity of labor and the equilibrium wage increase when:

labor demand shifts to the right, if wages are flexible.

In macroeconomics, what name is given to the costs of changing prices that businesses must consider?

menu cost

The sum of all the income received for contributing resources to GDP is called ___________________.

national income (Y)

Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.

policy prescription

The Keynesian economic framework is based on an assumption that:

prices and wages are sticky and do not adjust rapidly.

In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP?

recessionary gap

The onset of a trade deficit is most likely supported by a country's:

strong economic growth.

Refer to the graph shown below. At point A:(Graph Inflation on the vertical axis and unemployment on vertical axis with a downward slope with point A at top of horizontal axis point c curving down and point B at the outward corner end of vertical axis)

the economy's unemployment rate is very low

Refer to the graph shown below. Point C in the graph represents: (Graph Inflation on vertical axis and unemployment on vertical axis with a downward slope with point A at top of horizantal axis point c curving down and point B at the outward corner end of vertical axis)

the level Keynesian macroeconomic policy strives for. a moderate growth level in the economy. a moderate level of unemployment in the economy. Correct answer: moderate inflation and all of the above.