Quiz 9

A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy?

trade surplus

From a macroeconomic point of view, which of the following is a source of demand for financial capital?

government borrowing

An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following?

productivity and economic growth

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement.

A ___________________________________ can lead to disruptive economic patterns and heavy strains on a countryÕs banking and financial system.

sustained pattern of large budget deficits

If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from:

the credit card company's M1 funds.

A ______________________ means that government spending and taxes are equal.

balanced budget

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?

by increasing its reserves

An increase in government borrowing can:

crowd out private investment in physical capital.

An increase in the government's budget surplus will cause the interest rate to:

decrease.

A reduction in government borrowing can:

give private investment an opportunity to expand.

A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment.

higher interest rate

A government will likely ____________________________ to encourage investment in technology R&D by private firms?

implement fiscal policy establishing tax incentives

A decrease in the government's budget surplus will cause the interest rate to:

increase

Currently, the US government accumulated debt to GDP ratio:

is lower than its historical high point.

A prolonged period of budget deficits may lead to ___________________.

lower economic growth

A moderate increase in a budget deficit that leads to a _____________________ is not necessarily a cause for concern.

moderate increase in a trade deficit and a moderate appreciation of the exchange rate