macro ch. 10, 13
CH. 20, EX. 1 A shift in the aggregate supply curve in Exhibit 1 from AS1 to AS2 would be caused by a (an): a. decrease in input prices. b. increase in input prices. c. increase in real GDP. d. decrease in real output
A
CH. 20, EX. 1 In Exhibit 1, the change in equilibrium from E2 to E1 represents: a. cost-push inflation. b. demand-pull inflation. c. price-push inflation. d. wage-push inflation
A
Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then: a. both real GDP and the price level will fall. b. real GDP will fall and the price level will rise. c. real GDP will rise and the price level will fall. d. both real GDP and the price level will rise.
A
The interest-rate effect is the impact on real GDP caused by the direct relationship between the interest rate and the: a. price level. b. exports. c. consumption. d. investment.
A
Which of the following are beliefs of classical theory? a. Long-run full employment. b. Inflexible wages. c. Inflexible prices. d. All of the answers above are correct. e. None of the answers above are correct
A
Most of the U.S. national debt is owed to ____________. Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of____________. a. foreigners, foreigners. b. other U.S. citizens, bondholders c. foreigners, those needing government services d. other U.S. citizens, those needing government services.
B
An increase in regulation will shift the aggregate: a. demand curve leftward. b. supply curve rightward. c. supply curve leftward. d. demand curve rightward.
C
Crowding out occurs when the federal government: a. raises taxes to finance a budget deficit. b. refinances maturing U. S. Treasury bonds. c. borrows by selling bonds to finance a deficit. d. uses a budget surplus to pay off part of the national debt.
C
If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a: a. balanced budget amendment. b. deficit reduction plan. c. tax increase. d. continuing resolution.
D
In recent years, net interest payments as a percentage of GDP has been: a. increasing, but by such a small amount that it is not a matter of concern. b. increasing. c. constant. d. decreasing.
D
Keynes theorized that there are _________ when equilibrium real GDP is below the full employment level, which implies a ________ aggregate supply curve. a. highly flexible prices and wages, vertical b. highly flexible prices and wages, horizontal c. fixed prices and wages, vertical d. fixed prices and wages, horizontal
D
The U.S. Treasury financed federal budget deficits by selling: a. Treasury bonds. b. Treasury notes. c. Treasury bills. d. All of the answers above. are correct e. None of the answers above are correct
D
If all the national debt were owned internally, the federal government would not need to: a. worry about raising taxes to pay interest on the national debt. b. refinance the national debt. c. be concerned about the effect on the distribution of income from interest payments on the national debt. d. All of the answers above are correct. e. None of the answers above are correct.
E
The concurrent problems of inflation and unemployment is termed: a. depression. b. downturn. c. deflation. d. demand-pull inflation. e. stagflation.
E
T OR F Internal ownership of the debt refers to the portion of the national debt owned by government agencies.
F
T OR F The interest-rate effect is the impact on real GDP caused by the inverse relationship between the price level and the interest rate.
F
T OR F The net exports effect is the direct relationship between net exports and the price level of an economy.
F
T OR F The quantity of real GDP rises with the price level, ceteris paribus.
F
T OR F A leftward shift in the aggregate supply curve along a fixed aggregate demand curve will cause cost-push inflation.
T
The shows the level of real GDP purchased in the economy at different price levels during a period of time.
aggregate demand curve
The shows the level of real GDP that an economy produces at different possible price levels. The shape of the aggregate supply curve depends upon the flexibility of prices and wages as real GDP expands and contracts
aggregate supply curve
The is the legislated legal limit on the national debt.
debt ceiling
The legislated legal limit on the national debt.
debt ceiling
The aggregate curve represents the level of real GDP purchased by households, businesses, government, and foreigners
demand
The national debt is the portion of the national debt owed to foreigners.
external
is a burden because it is the portion of the national debt a nation owes to foreigners. When interest is paid on this type of debt, this income transfers purchasing power to other nations.
external national debt
The range is the rising segment of the aggregate supply curve.
intermediate
In the of the aggregate supply curve, both prices and costs rise as real GDP rises toward full employment.
intermediate range
The national debt is the portion of the national debt citizens owe to themselves.
internal
The percentage of the national debt a nation owes to its own citizens is called
internal national debt
The range is the horizontal segment of the aggregate supply curve.
keynesian
The is the dollar amount that the federal government owes holders of government securities. It is the cumulative sum of past deficits.
national debt
The is the inverse relationship between the purchasing power of fixed‑value financial assets and inflation which causes a shift in the consumption schedule
real balances effect
The assumes a fixed money supply and, therefore, inflation increases the demand for money. As the demand for money increases, the interest rate rises causing consumption and investment spending to fall.
real interest rate effect
The effect is the impact on total spending (real GDP) caused by the inverse relationship between the price level and the real value of financial assets with fixed nominal value.
wealth
A group of economics who believed recessions would naturally be eliminated by the price system is called _________________.
classical economists
The vertical segment of the aggregate supply curve is called the .
classical range
The vertical segment of the aggregate supply curve.
classical range
The ______________________________ is a theory that Treasury securities resulting from federal deficits increases wealth and consumer spending.
crowding in effect
The effect is a cut in private‑sector spending caused by federal deficits.
crowding out
The ___________________________ is a theory that government borrowing to finance its deficit causes the interest rate to rise. As the interest rate rises, consumption and business investment fall.
crowding out effect
The effect is the impact on total spending (real GDP) caused by the inverse relationship between the price level and the net exports of an economy.
net exports
The is the inverse relationship between net exports and inflation. An increase in the U.S. price level tends to reduce U.S. exports and increase imports and vice versa.
net exports effect
. Other factors held constant, a decrease in resource prices will shift the aggregate: a. demand curve leftward. b. demand curve rightward. c. supply curve leftward. d. supply curve rightward.
D
. __________ inflation can be explained by an _______ shift in the aggregate ________ curve. a. Demand-pull, inward, demand b. Cost-push, outward, supply c. Demand-pull, outward, supply d. Cost-push, inward, supply
D
An increase in the price level caused by a rightward shift of the aggregate demand curve is called: a. demand shock inflation. b. supply shock inflation. c. cost-push inflation. d. demand-pull inflation.
D
Compared to Japan, the national debt as a percentage of GDP in the United States is: a. substantially larger. b. the same. c. slightly larger. d. substantially smaller.
D
The crowding-out effect can be: a. zero. b. partial. c. complete. d. Any of the answers above is correct.
D
Which of the following U.S. Treasury securities represents internal ownership of the national debt? a. Bonds owned by private individuals. b. Bonds owned by the Social Security Administration. c. Bonds owned by the banks and insurance companies. d. All of the answers above are correct.
D
Which of the following could not be expected to shift the aggregate demand curve? a. Net exports fall. b. Consumption spending decreases. c. An increase in government spending. d. A change in real GDP.
D
High unemployment and rapid inflation.
stagflation
is an economy experiencing inflation and unemployment simultaneously.
stagflation
The aggregate curve is the level of real GDP supplied by firms.
supply
T OR F An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.
T
T OR F Bonds owned by financial institutions represent ownership of the national debt by the private sector.
T
T OR F If aggregate demand equals aggregate supply, macroeconomic equilibrium exists.
T
T OR F The Classical approach to a downturn in the business cycle was for the government to do nothing.
T
T OR F The Classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment.
T
T OR F The aggregate supply curve shows the relationship between the price level and the level of real GDP produced by the nation's economy.
T
T OR F The way to prevent the national debt from growing is for the budget not to be in deficit.
T
T OR F When we speak of the national debt, we refer to the federal government debt only.
T
In the intermediate range of the aggregate supply curve, if government expenditures increase caused the aggregate demand curve to shift outward, which of the following is most likely to occur? a. The price level and real GDP will both rise. b. The price level will not change, but real GDP will increase. c. The price level will rise, but real GDP will not change. d. Both the price level and real GDP will not change.
A
The national debt is unlikely to cause national bankruptcy because the: a. national debt can be refinanced by issuing new bonds. b. interest on the public debt equals GDP. c. national debt cannot be shifted to future generations for repayment. d. federal government cannot repudiate the outstanding national debt
A
The pre-Keynesian or classical economic theory viewed the long-run aggregate supply curve for the economy to be: a. backward bending at the full-employment level of real GDP. b. positively sloped at the full-employment level of real GDP. c. horizontal at the full-employment level of real GDP. d. None of the answers above are correct.
D
In the aggregate demand and supply model, the: a. aggregate supply curve is horizontal at full-employment real GDP. b. vertical axis measures real GDP. c. vertical axis measures the average price level. d. All of the answers above are correct. e. None of the answers above are correct.
C
The national debt is best described as the: a. amount by which this year's federal spending exceeds its taxes. b. value of all U. S. Treasury bonds owned by foreigners. c. sum of all federal budget deficits, past and present. d. percentage of GDP needed to finance a country's investment.
C
The net exports effect is the inverse relationship between net exports and the __________ of an economy. a. real GDP. b. GDP deflator. c. price level. d. consumption spending.
C
The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment is: a. supply-side economics. b. Keynesian economics. c. classical economics. d. mercantilism.
C
The sum of past federal budget deficits is the: a. GDP debt. b. trade debt plus GDP. c. national debt. d. Congressional debt.
C
Along the Keynesian range of the aggregate supply curve, a decrease in the aggregate demand curve will decrease: a. only the price level. b. only real GDP. c. both the price level and real GDP. d. real GDP and reduce the price level.
B
Assuming prices and wages are fully flexible, the aggregate supply curve will be: a. upward sloping, but not vertical. b. vertical. c. horizontal. d. downward sloping.
B
Between 1945 and 1980, the national debt as a percent of GDP: a. increased substantially. b. decreased substantially. c. remained about the same. d. increased slightly. e. decreased slightly.
B
Currently, the net interest payment as a percentage of GDP is about: a. 5 percent. b. 1 percent. c. 10 percent. d. 20 percent.
B
If the national debt rises to the debt ceiling and there is currently a budget ______________, then Congress and the President must agree to ______________ the debt ceiling or else the federal government will have insufficient funds to pay its bills and will be forced to shut down. a. surplus, lower b. deficit, raise c. deficit, lower d. None of the answers above are correct.
B
Which of the following is false? a. The national debt's size decreased steadily after World War II until 1980 and then increased sharply each year. b. The national debt increases whenever the federal government has a surplus budget. c. The size of the national debt currently is about the same size as it was during World War II. d. All of the answers above are false. e. All of the answers above are true.
D
Which of the following statements about crowding out is true? a. It can completely offset the multiplier. b. It is caused by a budget deficit. c. It is not caused by a budget surplus. d. All of the answers above are correct. e. None of the answers above are correct.
D
Which of the following statements is true? a. The national debt as a percentage of GDP is greater today than during any other period in our nation's history. b. A sizeable external national debt will transfer purchasing power away from foreigners to domestic citizens. c. Keynesian theory assumes a total crowding-out effect associated with deficit spending. d. U. S. national debt has more than tripled since 1980.
D
With regard to the national debt, to whom does the federal government owe money? a. Taxpayers b. Federal government workers c. The Treasurer of the United States d. Investors who buy U.S. Treasury bills, bonds, and notes
D
The federal budget process begins when federal agencies submit their budget requests to the: a. Congressional Budget Office (CBO). b. Council of Economic Advisors (CEA). c. Department of Commerce (DOC). d. Treasury Department. e. None of the answers above are correct.
E
Which of the following is not a component of the aggregate demand curve? a. Government spending (G). b. Investment (I). c. Consumption (C). d. Net exports (X-M). e. Saving.
E
T OR F An increase in input prices will cause the aggregate supply curve to shift rightward.
F
T OR F External debt refers to the portion of the national debt owned by private individuals and internal debt refers to that part owned by the public sector.
F
T OR F Increased government borrowing stimulates private borrowing because of its effect on interest rates
F
T OR F Less of the federal debt is owned by federal, state, and local governments than is owned by foreigners.
F
T OR F The Keynesian view is that the aggregate supply curve is vertical
F
T OR F The entire national debt is owed to U.S. citizens.
F
The effect is the impact on total spending (real GDP) caused by the direct relationship between the price level and the interest rate.
interest rate
The of the aggregate supply curve is horizontal because neither the price level or production costs will increase with substantial unemployment in the economy.
keynesian range
The total amount owed by the federal government.
national debt