econ test 3

in the diagram, solid arrows reflect real flows and broken arrows are monetary flows. flow 1 might represent

Government provision of highways for truck transportation

if the economy is initially at full employment, which of the diagrams best portrays a recession asa result of an increase in the cost of production

Graph (2) AS shift left

an increase in the price in the aggregate expenditures model would

Increase aggregate expenditures and decrease real GDP.

assuming that MPC is .75, equal increases in government spending and tax collection by $10 billion will a) leave the equilibrium real GDP unchanged b) increase the equilibrium real GDP by $10 billion c) increase the equilibrium real GDP by 2.5 billion d) reduce the equilibrium real GDP by $10 billion

Increase the equilibrium GDP by $10 billion

the economy experiences a decrease in the price level and an increase in real domestic output. which is a likely explanation? a) consumer income and the quantity of labor have decreased b) business cost and wages rates have decreased c) the price of imported resources have increased d) national income abroad has increased

Interest rates and wage rates have decreased

if the real interest rate falls then the

Investment schedule will shift upward

if the slope of a linear consumption schedule increases in a private closed economy then it can be concluded that the

MPC has increased

in the figure AD1 and As1 represent the original aggregate supply and demand curve. if Q1 is full- employment output, then the long run aggregate supply curve is located at output level

Q2

if the dollar depreciates relative to foreign currencies, then aggregate

demand increases

in the effort to avoid recession, the government implements tax rebate program, effectively cutting taxes for households. we would expect this to

increase aggregate demand

In the figure, AD2 and AS2 represent the original aggregate supply and demand curves. If Q3 is full-employment output, then AD2 and AS1 best represents a period of A) Hyperinflation B) stagflation C) Low unemployment D) expansion

stagflation

If the economy falls into a recession, automatic stabilizers will cause

tax receipts to fall and government spending to rise

if the government wishes to increase the level of real GDP, it might reduce

taxes

in the diagram, solid arrows reflect real flows and broken arrows are monetary flows. flow 7 might represent

the U.S. Bureau of Engraving and Printing's expenditures for paper.

A tax structure is called progressive when

the average tax rate decreases if income decreases

the marginal propensity to save is .2 equilibrium real GDP will decrease by $50 billion if aggregate expenditure schedule decrease by

$10 billion

which of the following effects best explains the downward slop of the aggregate demand curve

An interest-rate effect

social security contributions are part of

payroll taxes

which would be considered to be one of the factors that shifts the aggregate supply curve in the short run? a change in

personal income taxes

if everyone pays a fixed dollar amount of tax, then the tax is a

proportional tax

the following data represents a person income tax schedule. Answer the next question on the basis of this information. the average tax rate at the $60,000 level of income is

15%

answer the following question using the following budget information for a hypothetical economy. Assume that all budget surplus are used to pay down the public debt. as a percentage of GDP, the budget deficit was in year 3

2.5 spending - revenue = / GDP X 100

Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals

4

to answer the next question use the information in the table below which illustrates the multiplier process resulting from an autonomies increase in investments by $5... the multiplier in the economy is

4

which of the following fiscal changes would be the most expansionary

A $40 billion increase in government spending

Refer to the graph shown. An economy is in both short- and long-run equilibrium at

C only

due to atomic stabilizers, when the nation's total income rises, government transfer payments

Decreases and tax revenues increase

the marginal propensity to consumer is represent by

EG/DG

as income falls from level 3 to level 2 the amount of

Saving decreases

the economy is at equilibrium at point C. which is below potential output. what fiscal policy would increase real GDP

Shift aggregate demand by increasing transfer payments

in the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum Taxes T of the same amount will have

different effects on GDP, with the change in G having a larger impact than the change in T

which of the following is the largest expenditure item of local governments

education

when the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be

expansionary

when the federal government uses taxation and purchasing actions to stimulate the economy it is conducting

fiscal policy.

government should undertake neither an expansionary nor a contractionary fiscal policy.

government should undertake neither an expansionary nor a contractionary fiscal policy.

If a tax is progressive, then

its average rate increases as income increases the average tax rate decreases as taxable income decreases

one timing problem in using fiscal policy to counter a recession in the "implementation lag" that occurs between the

time fiscal action is taken and the time that the action has its effect on the economy

the long-run aggregate supply curve is

vertical