MACRO Exam 3

Built-in stability means that? a) an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. b) with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus. c) Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. d) government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

b

If a $25 billion increase in government expenditures increases equilibrium GDP by $100 billion, then? a) the MPS is 0.25 for this economy. b) the MPC is 1.0 in this economy. c) none of the above. d) the multiplier is 2.5.

a

If the consumption schedule is linear, then the? a) saving schedule will also be linear b) MPS will decline as income rises c) MPC will decline as income rises d) APC will be constant at all levels of income

a

The cyclically-adjusted budget deficit for the United States? a) rose to −7.5 percent of potential GDP in 2009. b) was zero in 2009, but the cyclical deficit created by the recession was −2.0 percent of potential GDP. c) changed to a surplus in 2009. d) rose to −4.0 percent of potential GDP in 2009 but has since decreased.

a

The immediate-short-run aggregate supply curve represents circumstances where? a) both input and output prices are fixed. b) both input and output prices are flexible. c) input prices are fixed, but output prices are flexible. d) input prices are flexible, but output prices are fixed.

a

suppose the price level is fixed, the MPC is 0.50, and the GDP gap is a negative $84 billion. To achieve full-employment output (exactly), government should? a) reduce taxes by $84 billion. b) increase government expenditures by $84 billion. c) reduce taxes by $42 billion. d) reduce government expenditures by $42 billion.

a

If the MPC in an economy is 0.80, government could shift the aggregate demand curve leftward by $32 billion by? a) increasing taxes by $8 billion. b) increasing taxes by $6.4 billion. c) reducing government expenditures by $32 billion. d) reducing government expenditures by $4 billion.

a

The MPC for an economy is? a) the slope of the consumption schedule or line b) the slope of the savings schedule or line c) 1 divided by the slope of the consumption schedule or line d) 1 divided by the slope of the savings schedule or line

a

If an unintended increase in business inventories occurs at some level of GDP, then GDP? a) entails a rate of aggregate expenditures in excess of the rate of aggregate production. b) may be either above or below the equilibrium output. c) is too low for equilibrium. d) is too high for equilibrium.

d

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will? a) shift the aggregate demand curve leftward. b) shift the aggregate supply curve leftward. c) decrease U.S. exports and increase U.S. imports. d) increase U.S. exports and decrease U.S. imports.

d

Disposable income goes up, the? a) average propensity to consume falls b) average propensity to save falls c) volume of consumption declines absolutely d) volume of investment diminishes

a

A private closed economy will expand when? a) actual GDP is less than potential GDP. b) unplanned decreases in inventories occur. c) aggregate expenditures are less than GDP. d) unplanned increases in inventories occur.

b

An upward shift of the aggregate-expenditures schedule might be caused by? a) a decrease in exports, with no change in imports. b) a decrease in imports, with no change in exports. c) an increase in exports, with an equal decrease in investment spending. d) an increase in imports, with no change in exports.

b

Ig = 40 X = 20 M = 30 (Advanced analysis) The equations give information for a private open economy. The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. In equilibrium, saving is? a) $20. b) $30. c) $40. d) $50.

b

An appropriate fiscal policy for severe demand-pull inflation is? a) an increase in government spending. b) depreciation of the dollar. c) a reduction in interest rates. d) a tax rate increase.

d

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. If the per-unit price of raw materials rises from $4 to $8 and all else remains constant, the per-unit cost of production will rise by about? a) 100 percent. b) 50 percent. c) 40 percent. d) 30 percent.

d

C = 40 + 0.8Y Ig = 40 X = 20 M = 30 (Advanced analysis) The equations give information for a private open economy. The letters Y, C, Ig, X, and M stand for GDP, consumption, gross investment, exports, and imports, respectively. Figures are in billions of dollars. The equilibrium GDP (=Y) in the economy is? a) $200. b) $245. c) $320. d) $350.

d

Higher interest rates may cause? a) consumers to decide not to purchase a new house or new automobile. b) businesses to postpone a potential purchase of capital. c) an increase in the amount of investment spending. d) both A and B.

d

If disposable income increases by $50 billion and there is an MPS of 0.20, the increase in saving will be? a) $20 billion b) $50 billion c) $100 billion d) $10 billion

d

If the United States wants to increase its net exports, it might take steps to? a) increase its GDP. b) reduce existing tariffs and import quotas. c) appreciate the dollar compared to foreign currencies. d) depreciate the dollar compared to foreign currencies.

d

In the aggregate-expenditures model, it is assumed that investment? a) automatically changes in response to changes in real GDP. b) changes by less in percentage terms than changes in real GDP. c) does not respond to changes in interest rates. d) does not change when real GDP changes.

d

Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will the change in investment increase aggregate demand? a) $12 billion b) $20 billion c) $33.3 billion d) $50 billion

d

In a mixed open economy, the equilibrium GDP is determined at that point where? a) Sa + M + T = Ig + X + G. b) the 45-degree line and the saving schedule intersect. c) Sa + X + G = Ig + T. d) Sa + Ig + X = G + T.

a

Net exports are? a) exports minus imports. b) imports minus exports. c) exports plus imports. d) always some positive amount.

a

Other things equal, an increase in nominal wages will? a) shift the aggregate supply curve to the left. b) shift the aggregate supply curve to the right. c) shift the aggregate demand curve to the left. d) shift the aggregate demand curve to the right.

a

In an effort to avoid a recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to? a) affect neither aggregate supply nor aggregate demand. b) increase aggregate demand. c) reduce aggregate demand. d) reduce aggregate supply.

b

At equilibrium real GDP in a private closed economy? a) the MPC must equal the APC. b) the slope of the aggregate-expenditures schedule equals the MPS. c) aggregate-expenditures and real GDP are equal. d) planned saving and consumption are equal.

c

In the late 1990s, the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the? a) Keynes effect b) interest rate effect c) wealth effect d) multiplier effect

c

If the marginal propensity to consume is 0.65 then the marginal propensity to save must be? a) 1.35 b) 0.65 c) 1. d) 0.35

d

If the multiplier in an economy is 5, a $10 billion increase in net exports will? a) reduce GDP by $2 billion. b) decrease GDP by $50 billion. c) increase GDP by $10 billion. d) increase GDP by $50 billion.

d

The equilibrium price level and level of real output occur where? a) real output is at its highest possible level. b) exports equal imports. c) the price level is at its lowest level. d) the aggregate demand and aggregate supply curves intersect.

d

Which of the following represents the most contractionary fiscal policy? a) a $30 billion tax cut b) a $30 billion increase in government spending c) a $30 billion tax increase d) a $30 billion decrease in government spending

d

If consumers expect their future real income to rise, they will? a) tend to spend more of their current incomes now. b) tend to spend less of their current incomes now. c) not change their current spending plans. d) tend to save more money now.

a

If households expect the current economic boom will continue far into the future and real interest rates are staying very low, then we can expect? a) household consumption to increase, shifting the consumption schedule up and the saving schedule down b) households to begin to be concerned about excessive spending and start cutting back on nonessential purchases c) household saving to increase so to be ready for the recession that will eventually occur d) the reverse wealth effect to occur

a

A withdrawal of potential spending from the income-expenditures stream via saving, tax payments, or imports is a(n)? a) injection. b) leakage. c) expenditure gap. d) tariff.

b

Contractionary fiscal policy? a) will cause Xn to change, but not Ig. b) if successful, will reduce demand-pull inflation. c) if successful, will lift the economy out of a recession. d) will increase the price level and the level of GDP.

b

Exports have the same effect on the current size of GDP as? a) imports. b) investment. c) taxes. d) saving.

b

For a private closed economy, an unintended decline in inventories suggests that? a) aggregate expenditures are less than the business sector expected them to be. b) aggregate expenditures exceed production. c) actual investment exceeds saving. d) planned investment is greater than consumption.

b

If investment decreases by $21 billion and the economy's MPC is 0.5, the aggregate demand curve will shift? a) leftward by $105 billion at each price level. b) leftward by $42 billion at each price level.. c) rightward by 42 billion at each price level.. d) rightward by $21 billion at each price level.

b

If the marginal propensity to consume is 0.7, then the marginal propensity to save must be? a) 1.3 b) 0.3 c) 0.7 d) 1.0

b

If the margional propensity to consume is 0.9, then the marginal propensity to save must be a) 1.0 b) 0.1 c) 1.1 d) .11

b

In contrast to investment, consumption is? a) relatively unstable b) relatively stable c) measurable d) unmeasurable

b

Other things equal, a 10 percent decrease in corporate income taxes will? a) decrease the market price of real capital goods b) have no effect on the location of the investment demand curve c) shift the investment-demand curve to the right d) shift the investment-demand curve to the left

c

Other things equal, an improvement in productivity will? a) shift the aggregate demand curve to the left. b) shift the aggregate supply curve to the left. c) shift the aggregate supply curve to the right. d) increase the price level.

c

The amount by which federal tax revenues exceed federal government expenditures during a particular year is the? a) Federal Reserve. b) budget deficit. c) budget surplus. d) public debt.

c

An increase in input productivity will? a) shift the aggregate supply curve leftward. b) reduce the equilibrium price level, assuming downward flexible prices. c) reduce the equilibrium real output. d) reduce aggregate demand.

b

An investment-demand curve is a curve that shows the amounts of investment demanded by an economy at a series of? a) nominal interest rates b) real interest rates c) real inflation rates d) nominal saving rates

b

The immediate short-run lasts? a) exactly 4 weeks. b) as long as both input prices and output prices stay fixed. c) for one week or less. d) as long as input prices but not output prices stay fixed.

b

In a mixed closed economy? a) government purchases and saving are injections, while investment and taxes are leakages. b) taxes and government purchases are leakages, while investment and saving are injections. c) taxes and savings are leakages, while investment and government purchases are injections. d) taxes and investment are injections, while saving and government purchases are leakages.

c

The 45 degree line on a graph relating consumption and income shows? a) all the points where the MPC is constant b) all the points at which saving and income are equal c) all the points at which consumption and income are equal d) the amounts households will plan to save at each possible level of income

c

The aggregate supply curve (short-run) is upsloping because? a) wages and other resource prices match changes in the price level. b) the price level is flexible upward but inflexible downward. c) per-unit production costs rise as the economy moves toward and beyond its full-employment real output. d) wages and other resource prices are flexible upward but inflexible downward.

c

As it relates to the aggregate-expenditures model, a leakage is? a) an addition of spending into the income-expenditure stream: any increment to consumption, investment, government purchases, or net exports. b) a withdrawal of spending through taxes, government purchases, and exports. c) when someone other than the intended recipient intercepts and cashes a government stimulus check. d) a withdrawal of potential spending from the income-expenditures stream via saving, tax payments, or imports.

d

The consumption schedule shows? a) that the MPC increases in proportion to GDP b) that households consume more when interest rates are low c) that consumption depends primarily on the level of business investment d) the amounts households intend to consume at various possible levels of aggregate income

d

In a certain year, the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price level stability under these conditions, the government should? a) increase tax rates and/or reduce government spending. b) discourage personal saving by reducing the interest rate on government bonds. c) increase government expenditures. d) encourage private investment by reducing corporate income taxes.

a

The APC is calculated as? ( / = divided by) a) change in consumption / change in income b) consumption / income c) change in income / change in consumption d) income/ consumption

b

The amount by which government expenditures exceed revenues during a particular year is the? a) public debt. b) budget deficit. c) full employment. d) GDP gap.

b

The consumption schedule shows? a) a direct relationship between aggregate consumption and accumulated wealth b) a direct relationship between aggregate consumption and aggregate income c) an inverse relationship between aggregate consumption and accumulated financial wealth d) an inverse relationship between aggregate consumption and the price level

b

The equilibrium level of GDP is associated with? a) an excess of planned investment over saving. b) no unintended changes in inventories. c) an unintended decrease in business inventories. d) an unintended increase in business inventories.

b

A decline in disposable income? a) increases consumption by moving upward along a specific consumption schedule b) decreases consumption because it shifts the consumption schedule downward c) decreases consumption by moving downward along a specific consumption schedule d) increases consumption because it shifts the consumption schedule upward

c

A private closed economy includes? a) households, businesses, and government, but not international trade. b) households, businesses, and international trade, but not government. c) households and businesses, but not government or international trade. d) households only.

c

A specific reduction in government spending will dampen demand-pull inflation by a greater amount the? a) smaller is the economy's MPC. b) flatter is the economy's aggregate supply curve. c) smaller is the economy's MPS. d) less is the economy's built-in stability.

c

Assume the economy is at full employment and that investment spending declines dramatically. If the goal is to restore full employment, government fiscal policy should be directed toward? a) an equality of tax receipts and government expenditures. b) an excess of tax receipts over government expenditures. c) an excess of government expenditures over tax receipts. d) a reduction of subsidies and transfer payments and an increase in tax rates.

c

Dissaving occurs when? a) income exceeds consumption b) saving exceeds consumption c) consumption exceeds income d) saving exceeds income

c

The interest-rate effect suggests that? a) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. b) an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. c) an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. d) an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

c

The public debt is the amount of money that? a) state and local governments owe to the federal government. b) Americans owe to foreigners. c) the federal government owes to holders of U.S. securities. d) the federal government owes to taxpayers.

c

When current tax revenues exceed current government expenditures and the economy is achieving full employment? a) the cyclically-adjusted budget has neither a deficit nor a surplus. b) the cyclically-adjusted budget may have either a deficit or a surplus. c) the cyclically-adjusted budget has a surplus. d) the government is engaging in an expansionary fiscal policy.

c

Which of the following represents the most expansionary fiscal policy? a) a $10 billion tax cut b) a $10 billion increase in government spending c) a $10 billion tax increase d) a $10 billion decrease in government spending

b

The short-run aggregate supply curve has? a) a constant slope. b) a negative slope. c) a slope that is not constant. d) the same slope as the long-run aggregate supply curve.

c

The investment-demand curve suggest that? a) changes in the real interest rate will not affect the amount invested b) there is an inverse relationship between the real rate of interest and the level of investment spending c) an increase in business taxes will tend to stimulate investment spending d) there is a direct relationship between the real rate of interest and the level of investment spending

b

Assume the economy's consumption and savings schedules simultaneously shift downward. This must be the result of? a) an increase in disposable income b) an increase in household wealth c) an increase in personnel taxes d) the expectation of a recession

c

When a household borrows money today? a) it can increase current consumption beyond its disposable income b) it shifts the current consumption schedule upward c) decreases household debt (liabilities) d) it can increase current consumption beyond its disposable income and it shifts the current consumption schedule upward

d

If Trent's MPC is 0.80, this means that he will? a) spend eight-tenths of any increase in his disposable income b) spend eight-tenths of any level of disposable income c) break even when his disposable income is $8000 d) save two-tenths of any level of disposable income

a

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly), government should? a) increase government expenditures by $80 billion. b) reduce government expenditures by $40 billion. c) reduce taxes by $40 billion. d) reduce taxes by $80 billion.

d

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, and additional $5 billion between 15 and 20 percent, and so on. If the real interest rate is 15 percent in this economy, the aggregate amount of investment will be? a) $25 billion b) $20 billion c) $15 billion d) $10 billion

d

A decline in the real interest rate will? a) increase the amount of investment spending b) shift the investment schedule downward c) shift the investment-demand curve to the right d) shift the investment-demand curve to the left

a

Actual investment equals saving? a) at all levels of GDP. b) at all below-equilibrium levels of GDP. c) at all above-equilibrium levels of GDP. d) only at the equilibrium GDP.

a

An input whose price is often fixed in both the immediate-short-run and short-run is? a) labor, due to labor contracts. b) gasoline, due to supply issues. c) both A and B. d) neither A nor B.

a

If the equilibrium level of GDP in a private open economy is $1,000 billion and consumption is $700 billion at that level of GDP, then? A) saving must be $300 billion. B) net exports must be $300 billion. C) S + C must equal $300 billion. D) Ig + Xn must equal $300 billion.

D

If the saving schedule is a straight line, the? a) MPS must be constant b) APS must be constant c) APC must be constant d) MPC must be rising

a

The aggregate-expenditures model is built upon which of the following assumptions? a) Prices are fixed. b) The economy is at full employment. c) Prices are fully flexible. d) Government spending policy has no ability to affect the level of output.

a

The amount of real output that could be purchased at current prices if all of our assets were liquidated (turned to cash) and the money used to purchase goods and services is the? a) real-balances effect. b) interest-rate effect. c) foreign-purchases effect. d) liquidation effect.

a

The reason the long-run aggregate supply curve is vertical is? a) when both input prices and output prices are flexible, profit levels always adjust to give firms exactly the right profit incentive to produce the full-employment output level. b) when input prices and output prices are fixed, output levels adjust to ensure profit always equals zero. c) that the total amount of output supplied in the economy depends directly on the volume of spending that results at a constant price level. d) none of the above.

a

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will? a) increase the amount of U.S. real output purchased. b) increase U.S. imports and decrease U.S. exports. c) increase both U.S. imports and U.S. exports. d) decrease both U.S. imports and U.S. exports.

b

The crowding-out effect of expansionary fiscal policy suggests that? a) tax increases are paid primarily out of saving and therefore are not an effective fiscal device. b) increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment. c) it is very difficult to have excessive aggregate spending in the U.S. economy. d) consumer and investment spending always vary inversely.

b

The federal budget deficit is found by? a) subtracting government tax revenues plus government borrowing from government spending in a particular year. b) subtracting government tax revenues from government spending in a particular year. c) cumulating the differences between government spending and tax revenues over all years since the nation's founding. d) subtracting government revenues from the noninvestment-type government spending in a particular year.

b

If the multiplier in an economy is 5, a $20 billion increase in net exports will? a) increase GDP by $100 billion. b) reduce GDP by $4 billion. c) decrease GDP by $100 billion. d) increase GDP by $20 billion.

a

Discretionary fiscal policy will stabilize the economy most when? a) deficits are incurred during recessions and surpluses during inflations. b) the budget is balanced each year. c) deficits are incurred during inflations and surpluses during recessions. d) budget surpluses are continuously incurred.

a

A tax reduction of a specific amount will be more expansionary the? a) smaller is the economy's MPC. b) larger is the economy's MPC. c) smaller is the economy's multiplier. d) less is the economy's built-in stability.

b

An aggregate-expenditures schedule is a? a) curve or schedule that shows the amounts that firms plan to invest at various possible values of real gross domestic product (real GDP). b) table of numbers showing the total amount spent on final goods and final services at different levels of real gross domestic product (real GDP). c) table of numbers showing the total sales tax revenue generated on purchases of final goods and services. d) none of the above.

b

An economy is employing 4 units of capital, 7 units of raw materials, and 10 units of labor to produce its total output of 670 units. Each unit of capital costs $12; each unit of raw materials, $6; and each unit of labor, $3. If the per-unit price of raw materials rises from $6 to $10 and all else remains constant, the per-unit cost of production will rise by about? a) 52 percent. b) 10 percent. c) 42 percent. d) 100.1 percent.

b

If today, prospective car buyers expect a surge in the supply of cars on the market next week that will cause the price of cars to substantially decline, they will? a) wait for the price of cars to go down before buying, shifting aggregate demand to the right. b) wait for the price of cars to go down before buying, shifting aggregate demand to the left. c) go ahead and buy now, shifting aggregate demand to the left. d) go ahead and buy now, which will not affect aggregate demand at all.

b

What was unusual about the policy response to the COVID pandemic lockdowns in 2020? a) there was an extremely long operational lag b) there was zero administrative lag c) the amount of money involved was less than usual d) there was nothing unusual, it was a normal response to an ordinary event

b

Imports have the same effect on the current size of GDP as? a) exports. b) investment. c) consumption. d) saving.

d

A major advantage of the built-in or automatic stabilizers is that they? a) simultaneously stabilize the economy and reduce the absolute size of the public debt. b) automatically produce surpluses during recessions and deficits during inflation. c) require no legislative action by Congress to be made effective. d) guarantee that the federal budget will be balanced over the course of the business cycle.

c

If government increases the size of its cyclically-adjusted surplus, we can? a) assume that government is causing interest rates to rise. b) not determine government's impact on the economy without also knowing the status of the actual budget. c) assume that government is having a contractionary effect on the economy. d) assume that government is having an expansionary effect on the economy.

c

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift? a) leftward by $40 billion at each price level. b) leftward by $50 billion at each price level. c) rightward by $50 billion at each price level. d) rightward by $10 billion at each price level.

c

In a private closed economy, when aggregate expenditures equal GDP? a) consumption equals investment. b) consumption equals aggregate expenditures. c) planned investment equals saving. d) disposable income equals consumption minus saving.

c

The aggregate supply curve? a) is explained by the interest-rate, real-balances, and foreign purchases effects. b) gets steeper as the economy moves from the top of the curve to the bottom of the curve. c) shows the various amounts of real output that businesses will produce at each price level. d) is downward-sloping because real purchasing power increases as the price level falls.

c

The size of the MPC is assumed to be? a) less than zero b) greater than one c) greater than zero but less than one d) two or more

c

If Congress adjusted the U.S. tax system so that taxes were more progressive, the? a) economy would become more inflation prone. b) economy would become less stable. c) stability of the economy would be unaffected. d) economy would become more stable.

d

If at some level of GDP the economy is experiencing an unintended decrease in inventories? a) the aggregate level of saving will decline. b) the price level will fall. c) the business sector will lay off workers. d) domestic output will increase.

d

The aggregate-demand curve? a) is upsloping because a higher price level is necessary to make production profitable as production costs rise. b) is downward-sloping because production costs decline as real output increases. c) shows the amount of expenditures required to induce the production of each possible level of real output. d) shows the amount of real output that will be purchased at each possible price level.

d

The real-balances effect indicates that? a) an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending. b) a lower price level will decrease the real value of many financial assets and therefore reduce spending. c) a higher price level will increase the real value of many financial assets and therefore increase spending. d) a higher price level will decrease the real value of many financial assets and therefore reduce spending.

d

The reason a major tax change affects both the consumption schedule and saving schedule is? a) an increase in taxes reduces both household consumption and household saving b) any decrease in taxes will be partly consumed and partly saved by households c) taxes are paid partly at the expense of consumption and partly at the expense of saving d) all of the answers are correct

d

US public debt? a) refers to the debts of all units of government—federal, state, and local. b) consists of the total debt of U.S. households, businesses, and government. c) refers to the collective amount that U.S. citizens and businesses owe to foreigners. d) consists of the historical accumulation of all past federal deficits and surpluses.

d

As disposable income increases, consumption? a) and saving both increase b) and saving both decrease c) decreases and saving increases d) increases and saving decreases

a

Assume that in a private closed economy, consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus? a) saving is $10 billion. b) unplanned decreases in inventories of $10 billion will occur. c) the MPC is 0.80. d) unplanned increases in inventories of $10 billion will occur.

b

The cyclically-adjusted budget refers to? a) the inflationary impact that the automatic stabilizers have in a full-employment economy. b) that portion of a full-employment GDP that is not consumed in the year it is produced. c) the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment. d) the number of workers who are underemployed when the level of unemployment is 3 to 4 percent.

c

The cyclically-adjusted budget tells us? a) that in a full-employment economy, the federal budget should be in balance. b) that tax revenues should vary inversely with GDP. c) what the size of the federal budget deficit or surplus would be if the economy was at full employment. d) the actual budget deficit or surplus realized in any given year.

c

The definition of a lump-sum tax is? a) A tax that is levied only on imports, a lump-sum tax is never levied on exports. b) A tax that generates revenues all at one time and only once; it does not reoccur. c) A tax that collects a constant amount (the tax revenue of government is the same) at all levels of GDP. d) A tax that varies with GDP; the higher the GDP, the higher the tax.

c

Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left? a) a reduction in business taxes b) production bottlenecks occurring when producers near full plant capacity c) an increase in the price of imported resources d) deregulation of industry

c