Macroeconomics Final Exam Questions (Chapter 12)

A(n) _______ in net taxes has the same qualitative impact as a(n) ___________ in government spending. Increase; increase Decrease; decrease Decrease; increase

Decrease; increase

Which type of fiscal policy would cause the move of the AD curve represented in this graph? Higher government spending A decrease in the money supply Higher taxes

Higher government spending

Which of these actions is the government likely to take if the economy is operating above the potential GDP? Increase taxes Reduce taxes Increase government spending

Increase taxes

Which of these actions is the government likely to take if the economy is operating above the potential GDP? Increase taxes Increase government spending Reduce taxes

Increase taxes

A weather related incident that lowers crop yields is more likely to cause a cost shock in: Japan. the United States. India.

India. A weather related incident that lowers crop yields is more likely to cause a cost shock in India. A poor country where the citizens spend a larger fraction of their disposable income on food would suffer more from a weather-related cost shock. Japan and the United States would see price increases in some products but since food consumes a smaller fraction of the household budget the impact would not be as severe

Historically the Federal Reserve interest rates during recessions and interest rates during expansions. Lowers; raises Raises; raises Raises; lowers

Lowers; raises

Some economists believe the wages can be "stuck" and not adjust downward during recessions. These economists advocate: a laissez- faire attitude toward fiscal stimulus. active fiscal stimulus to move the economy back to full employment. a reduction in the money supply to stimulate growth.

active fiscal stimulus to move the economy back to full employment.

A cost shock will only occur if the product is used: as an input into numerous other products. infrequently as an input in food products. when other substitute goods exist.

as an input into numerous other products.

When the Fed would like to push interest rates into negative territory but is unable to do so it is called a: binding situation. negativity influx. ZIRP.

binding situation.

If the Fed is zero interest rate bound it means the Fed: will not allow interest rates to rise to zero. must keep interest rates above zero. cannot push interest rates below zero.

cannot push interest rates below zero.

The American Recovery and Reinvestment Act of 2009 is a clear example of: contractionary fiscal policy. an automatic stabilizer. expansionary fiscal policy.

expansionary fiscal policy.

Government policies that increase aggregate demand are called __________. recessionary policies expansionary policies contractionary policies

expansionary policies

The Fed's practice of increasing or decreasing interest rates to keep inflation in some range is known as: quantitative easing. pandering. inflation targeting.

inflation targeting.

Looking at recent Fed policy it appears the Fed has: engaged in inflation targeting. not engaged in inflation targeting. created more inflation than it eliminated. I DON'T KNOW YET

not engaged in inflation targeting.

John Maynard Keynes referred to animal spirits which are: a way of describing the cutthroat behavior of people. optimistic views of investors that propel economic growth. pessimistic views of the economy.

optimistic views of investors that propel economic growth.

John Maynard Keynes referred to animal spirits which are: a way of describing the cutthroat behavior of people. pessimistic views of the economy. optimistic views of investors that propel economic growth.

optimistic views of investors that propel economic growth.

In the horizontal range of the short-run aggregate supply curve, if aggregate demand shifts to the left, then: real GDP is unchanged. the price level falls. real GDP falls.

real GDP falls.

When economic growth occurs, a nation's: short-run and long-run AS curves shift rightward. long-run AS curve becomes horizontal. short-run AS curve shifts leftward.

short-run and long-run AS curves shift rightward.

According to the graph, the situation of this economy after the supply shock can be called: economic growth stagflation excess supply

stagflation

Keynes maintained that the economy could remain long-term at levels of output below the full-employment level of output due to: decreases in the money supply. sticky wages and prices. irrational expectations.

sticky wages and prices

According to the graph, an increase in the money supply is best described by: the shift in the AD curve the shift in the AS curve a move along the AD curve

the shift in the AD curve an increase in money supply means a change in AD curve because more money means more output and if the AD curve is changed then it increases its output

According to the graph, an increase in the money supply is best described by: a move along the AD curve the shift in the AS curve the shift in the AD curve

the shift in the AD curve if you shift the AD curve it produces more output

Expansionary fiscal policy works well when the economy is operating: slightly below the full employment level of output. well below the full employment level of output. well above the full employment level of output.

well below the full employment level of output.