Macro exam 2

The tax multiplied is 5 and, as a result of a change in taxes, equilibrium real gdp changes by $200 billion. What was the initial changes in taxes?

$40 billion

If an increase of $10 billion of government spending results in an increase in equilibrium real gdp of $40 billion, the multiplier equals

40 billion / 10 billion = 4

In an economy with no income taxes or imports, the marginal propensity to consume is .80. The expenditure multiplier is

5.00

Suppose the economy was initially at potential GDP. Then the world economy expands so that foreign income rises. What would be true?

Aggregate demand within the us increases and in the long run, money wage rates will rise

As the economy moves towards its long run equilibrium, the ____ curve shifts _____ because ______

Aggregate supply, rightward, the money wage rate falls

What policy would be good if an economy has an inflationary gap

An increase in the income tax

To achieve full employment in a recessionary gap, there should be ____

An increase in the money supply

Moving along the aggregate demand curve, a decrease in the quantity of real GDP demanded is a result of _____

An increase in the price level

In an expansion, federal tax receipts increase proportionally more than real gdp without the need for any government policy. This increase in an example of _____

Automatic fiscal policy

In the labor market, the income tax creates a tax wedge which raises the ______ wage rate, reduces the ______ wage rate, and ______ employment

Before tax, after tax, decreases

A change in the full employment of labor shifts ______

Both the aggregate supply curve and the potential gdp curve

Which growth theory predicts that even when technology advances, real gdp per person always returns to a subsistence level of income

Classical growth theory

What policy encourages economic growth

Creation of tax free savings account

In Brazil last year, the growth rate of real gdp was 3.5 % and the population grew from 1,000 million people to 1,100 million. Real gdp per person ______

Decreased by 6.5 %

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________

Does not change

The "double coincidence of wants" is _____

Eliminated with the use of money

The potential GDP line shows the level of real gdp_____

Equal to potential gdp, produced when the labor markets is in equilibrium, AND / OR when there is full employment

New growth theory asserts that

Human capital grows bc of choices and discoveries result from choices

Automatic stabilizers decrease the impact of a recession on the level of economic activity because they _______

Imply that disposable income does not change by as much as real gdp

The supply side effects show that a tax cut on labor income _____ the supply of labor and _____ employment.

Increases, increases

The government could increase aggregate demand by $1 trillion by _____

Increasing its purchases by less than $1 trillion

If the minimum is at the equilibrium wage in the labor market, _____

It will create neither a shortage nor a surplus

If the stock of physical capital (machinery, equipment, ect) and human capital remain the same and the population increases, then ______

Labor productivity will decrease

Classical growth theory predicts that increases in real gdp per person will _____

Not last bc higher income leads to a population explosion

One reason that the aggregate demand curve had a negative slope is because _______

People buy more foreign goods when the domestic price level rises

If the economy is in the expansion phase of a business cycle and investment increases, when then multiplier effect kicks in, the expansion ____

Picks up speed

At full employment, aggregate supply is = to ___

Potential gdp

What would result in an increase in equilibrium real gdp but a decrease in the equilibrium price level

Prices of crude oils decreases

Population growth directly brings growth in _____ because aggregate hours increase

Real gdp

How to calculate labor productivity

Real gdp / total labor hours

The productivity curve is a relationship between _____ and ______

Real gdp per hour of labor, capital per hour of labor

When we keep part of our wealth in a bank checking account, we are using money as a ______

Store of value

A change in money wages shifts ____

The aggregate supply curve but not the potential gdp line

What would result in an increase in both real gdp and the aggregate price level

The latest round of WTO talks significantly increases trade barriers which reduces imports

Although ________ initially proposes and ultimately approves the budget, the discussion and amendment process rests with ________.

The president, Congress

If workers are successful in obtaining 6 weeks of paid vacation where 2 weeks used to be the norm, then most likely:

The price levels will increase

Moving along a aggregate supply curve, as the price levels falls _____

The real wage rate increases

Once supply side effects are taken into account, tax cuts for labor income can change

The supply of labor and potential gdp

If you shop for a car online and compare car prices across dealerships, money is functioning as a ____

Unit of account

If capital per hour of labor decreases, real GDP per hour of labor _______

decreases for a given level of technology

A rise in the expected future inflation rate ______

increases aggregate demand

A recessionary gap means that short run macroeconomic equilibrium gdp ______

is less than full employment GDP

Needs-tested spending is defined as

spending on programs for people qualified to receive benefits.

The national debt can only be reduced if _____

the federal budget is in surplus.