econ test 3

rightward shift of the AD curve along an upsloping AS curve.

Graphically, demand-pull inflation is shown as a:

consume is three-fifths.

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:

Foreign buyers will find U.S. goods become more expensive

If the dollar appreciates relative to foreign currencies, then:

True

If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending.

flexible upward, but inflexible downward.

Prices and wages tend to be:

$6,000

Refer to the consumption schedule above. If disposable income is $42,000, then saving is:

.75

Refer to the consumption schedule above. The marginal propensity to consume is:

reduce government expenditures or increase taxes.

Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it would be appropriate for the government to:

an expansionary fiscal policy.

Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with:

a contractionary fiscal policy.

Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD3 to AD2 is consistent with:

aggregate supply has decreased, equilibrium output has decreased, and the price level has increased.

Refer to the diagram. If the aggregate supply curve shifted from AS0 to AS1 and the aggregate demand curve remains at AD0, we could say that:

Shift aggregate demand by increasing transfer payments

Refer to the figure above. The economy is at equilibrium at point C which is below potential output. What fiscal policy would increase real GDP?

APC is greater than 1.

Suppose a family's consumption exceeds its disposable income. This means that its:

Directly with the level of disposable income

The amount of consumption in an economy correlates:

Input prices have increased

The economy experiences an increase in the price level and a decrease in real domestic output. Which of the following is a likely explanation?

Net exports have increased

The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation?

reduce prices when a decline in aggregate demand occurs.

The fear of unwanted price wars may explain why many firms are reluctant to:

Average propensity to consume

The fraction, or percentage, of total income which is consumed is called the:

Decrease aggregate demand

The intent of contractionary fiscal policy is to:

level of income.

The most important determinant of consumption and saving is the:

a change in spending will change aggregate income by a larger amount.

The multiplier effect indicates that:

B.

Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of a decrease in the availability of key natural resources?

A.

Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of an increase in resource productivity?

D.

Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of declines in the incomes of U.S. trading partners?

True.

When the economy is experiencing demand-pull inflation, its real GDP tends to be rising.

A $10 billion increase in taxes and a $30 billion cut in government spending

Which of the following fiscal policy changes would be the most contractionary?

A $10 billion increase in government spending.

Which of the following represents the most expansionary fiscal policy?

The progressive income tax

Which of the following serves as an automatic stabilizer in the economy?

The expectation of a future decline in the consumer price index.

Which of the following will not tend to shift the consumption schedule upward?

negative

tax multiplier is always

Increase per-unit production costs and shift the aggregate supply curve to the left

If Congress passed new laws significantly increasing the regulation of business, this action would tend to:

spend eight-tenths of any increase in his disposable income.

If Trent's MPC is .80, this means that he will:

Of the consumption schedule upward and of the saving schedule downward

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift:

False

If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero.

Decrease aggregate demand and increase aggregate supply

If the U.S. dollar appreciates in value relative to foreign currencies, then this will:

a decrease in the prices of domestic resources.

In the diagram, a shift from AS1 to AS2 might be caused by:

Government revenues are greater than expenditures in a given year

A budget surplus means that:

True.

A change in business taxes and regulation can affect production costs and aggregate supply.

is highest in economy (1).

Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Refer to the given data. The marginal propensity to save:

$100 billion.

Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Refer to the data. The budget deficit in year 3 is:

average propensity to consume falls.

As disposable income goes up, the:

Serves as an automatic stabilizer for the economy

As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system:

True

Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.

In opposite directions; in the same direction

A change in interest rates would shift the consumption schedule and the saving schedule ______; a change in taxes would shift these two schedules ______.

leftward shift in the economy's aggregate demand curve.

A contractionary fiscal policy is shown as a:

True

A contractionary fiscal policy shifts the aggregate demand curve leftward.

Decrease in aggregate demand

A decrease in government spending will cause a(n):

Not undertake the investment because the expected rate of return of 4 percent is less than the real rate of interest

A firm invests in a new machine that costs $5,000 a year but which is expected to produce an increase in total revenue of $5,200 a year. The current real rate of interest is 7 percent. The firm should:

high nominal interest rate.

A high rate of inflation is likely to cause a:

The public debt can be easily refinanced by issuing new bonds

A major reason that the public debt cannot bankrupt the Federal government is because:

smaller is the economy's MPS.

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the:

rightward shift in the economy's aggregate demand curve.

An expansionary fiscal policy is shown as a:

Increase (or shift right) in aggregate demand now

An expected increase in the prices of consumer goods in the near future will:

Increase aggregate demand

An increase in expected future income will:

aggregate expenditures curve upward and the aggregate demand curve rightward.

An increase in net exports will shift the:

1, 3, and 8

Answer the question based on the following list of factors that are related to the aggregate demand curve. Which of the above factors best explain the downward slope of aggregate demand curve?

is highest in economy (2).

Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Refer to the given data. At an income level of $40 billion, the average propensity to consume:

.7.

Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. Refer to the given data. The marginal propensity to consume in economy (1) is:

False

Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

Discretionary fiscal policy refers to:

consumption exceeds income.

Dissaving occurs where: