Econ 202 Final

The government begins year 1 with $25 billion of debt. Based on the information in the above table, what is the amount of debt following year 2?

$20 billion

In which of the following year(s) did Germany experience inflation?

2003, 2004, 2005 and 2006

During a cost-push inflation spiral, the money wage rate ________ and the quantity of money ________.

A) increases; increases

Aggregate expenditure equals

C + I + G + X - M.

Once supply-side effects are taken into account, tax cuts for labor income can change I.the supply of labor. II.potential GDP.

I and II

In 2007, investment in France increased by 7 billion euros. Which of following occurs?

I, III and IV only

Who is the current chairman of the Federal Reserve?

Jerome Powell

If the expected future inflation rate decreases, then

aggregate demand decreases.

The price level falls if

aggregate demand increases more slowly than aggregate supply.

If the economy falls into a recession, which of the following responses constitutes the use of automatic fiscal policy?

an existing system to make government payments to the growing ranks of unemployed workers

Demand pull inflation can be started by

an increase in government expenditure.

Suppose that originally the marginal propensity to consume was 0.75. If the marginal propensity to consume rises, what will happen to the value of the multiplier?

become larger.

Bank reserves include I.the cash in the bank's vault. II.the bank's deposits at the Federal Reserve.

both I and II

Open market operations by the Fed lead to

changes in the federal funds rate.

If the marginal propensity to save is 0.2, every $10 increase in disposable income increases

consumption expenditure by $8.00.

The stimulus plan is considered

discretionary fiscal policy.

The Fed's goals include

price level stability.

Control of the nation's quantity of money is handled by

the Federal Reserve System.

In the above figure, suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods. In the short run, this change creates a movement to point ________ and afterwards an eventual increase in ________.

B; money wage rates

Which of the following does NOT shift the short-run aggregate supply curve?

a change in the price level

Stagflation is the result of

a decrease in short-run aggregate supply.

he Fed engages in open market operations and sells government securities. As long as the federal funds rate stays in the corridor, the result is

a higher federal funds rate.

Which of the following would cause an inflationary gap?

a large increase in foreign incomes and a small increase in the price of oil.

"UK Inflation Surges to 16-year High" According to the story, "High inflation in July will also lead to ... "further rises next January ..." Economists also noted that inflation may get worse because the current data did not yet include "announced rises in gas and electricity prices." The story reflects the concept of

cost-push inflation.

In the United States today, money consists of

currency and deposits at banks

Fiscal policy includes

decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure? Aggregate expenditure will

decrease by $180.

between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

decreases by $320 billion.

In the long run, an increase in government expenditure on goods and services ________ real GDP and ________ the price level.

does not change; rises

Liquidity is the

ease with which an asset can be converted into a means of payment with little or no loss of value.

If aggregate demand grows only slightly faster than potential GDP, then the economy will

experience economic growth with low inflation.

n the first half of 2008, food and energy costs in the United States increased. At the same time, the financial crisis slowed production. As a result, economists warned that the economy would

experience stagflation.

Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change, the following events happen: the money wage rate ________, unemployment ________, and the price level ________.

falls; falls; falls

If aggregate planned expenditure is less than real GDP then

firms' inventories will increase and real GDP will decrease as production falls.

A reason the government expenditure multiplier is larger than 1 is because

government expenditure changes generate changes in consumption expenditure.

When real GDP is less than potential GDP, an increase in government expenditures will ________ real GDP and ________ the price level.

increase; raise

As real disposable income increases, consumption expenditure ________ and saving ________.

increases; increases

he Federal Reserve lowers interest rates. As a result, in the short run, real GDP ________ and the price level ________.

increases; rises

The data in the above table indicate that when the price level is 120

inventories rise and the price level falls.

According to the story, if ________ in the software and related services sector increases by $15 billion, real GDP will increase by ________.

investment; $30 billion.

The multiplier effect exists because a change in autonomous expenditure

leads to changes in income, which generate further spending.

The quantity of real GDP demanded equals $18.2 trillion when the price level is 90. If the price level rises to 95, the quantity of real GDP demanded equals

less than $18.2 trillion.

Aside from being a means of payment, the other functions of money are

medium of exchange, unit of account, and store of value.

According to the Laffer curve, raising the tax rate

might increase, decrease, or not change the amount of tax revenue.

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

only part of the increase in disposable income from the tax cut is spent.

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

people substitute toward more imported goods and services.

At the start of a cost-push inflation

prices and unemployment are rising.

An inflationary gap occurs when

real GDP exceeds potential GDP.

In recent years, Elsweyr's capital stock has increased by about 6 percent from one year to the next. As a result, we would expect

rightward shifts in both Elsweyr's short-run aggregate supply and long-run aggregate supply curves.

As a unit of account, money is used to

state prices of all goods and services.

As a result of a tax increase

the aggregate demand curve shifts leftward.

An individual holds $10,000 in a checking account and the price level rises significantly. Hence

the individual's real wealth and consumption expenditure decrease.

A one-time rise in the price level can turn into a demand-pull inflation when

the quantity of money persistently increases.

When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand

unemployment will be at the natural rate.