EC 111 Exam 4 Aldridge

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if lower profits in foreign countries result in decreased investment form foreign countries into the united states, continued investment growth from saving will have to rely more on

U.S. household saving

if a country does not engage in trade with other countries, it is known as

a closed economy

a rightward shift of AS could be caused by

a decrease in tariffs on imported goods

a decrease in restrictions on immigration will result in

a decrease in the price level and an increase in employment

which of the following would shift the philips curve to the left -contractionary monetary policy -contractionary fiscal policy -an increase in import tariffs -a decrease in the regulation of business

a decrease in the regulation of business

according to the supply-side theory, which of the following would shift the aggregate supply curve leftward? -a higher min wage -government deregulation -lower marginal tax rates -elimination of structural bottlenecks

a higher min wage

many economists argue that government price indexes overstate inflation by 1-2%. from the point of view of those designing economic policy, this is an example of

a measurement problem

structural unemployment is caused by

a mismatch btwn the skills of job seekers and the requirements of available jobs

for a negative sloping philips curve, an increase in AD would cause

a movement up the curve

what would be illustrated by monetarists to show the effect of an increase in the quantity of money on the economy

a rightward shift of aggregate demand

what would be illustrated by keynesians to show the effects of stimulative fiscal policy on the economy

a rightward shift of aggregate demand; AS makes a right side 90 degree L

an attempt to lower unemployment with demand-side stimulus policies will cause an increase in the price level, which is illustrated by

a rightward shift of the aggregate demand curve

over a given period of time, if imports are greater than exports, the result is

a trade deficit

if the terms of trade btwn two countries lie somewhere btwn their respective opportunity costs, then the effect of trade will include

consumption outside the ppc for both countries

when a country has a lower opportunity cost in producing a good than any other country

consumption possibilities will increase with specialization and trade

the sale of bonds by the Fed in the open market will result in a __ in the money supply and a __ shift of __

decrease; leftward; AD

monetarists believe that an increase in the money supply shifts the aggregate

demand curve to the right

what policy obstacle could occur because it is difficult to know how market participants will respond to specific policies

design problems

an inflationary GDP gap is equal to the

difference btwn equilibrium GDP and full-employment GDP

the idea of rational expectations suggests that

economic policies are ineffective if the policies are anticipated

a supply-side policy to cure a recession might include

elimination of the min wage

in terms of the world as a whole, imports must equal exports because

every good exported by one country becomes an import for another country

which of the following is a responsibility of congress? -monetary policy -fiscal and supply-side policy -monetary and fiscal policy -monetary, fiscal, and supply-side policy

fiscal policy and supply-side policy

the opportunity costs of different policies must be weighed to solve which obstacle

goal conflicts

the best measure of net investment is

gross investment - depreciation

what group believes that people will realize what the government is attempting to do and take action to offset government policy

new classical economist

expansionary monetary and fiscal policies are designed to move the economy, in the short run,

onto and along the ppc

the united states has an absolute advantage in producing t-shirts, but not a comparative advantage, because

other countries, such as china, can produce t-shirts at a lower oppoutunity cost relative to the united states

which of the following would shift the long-run AS curve to the right? -the elimination of government-subsidized college loans -the elimination of job training programs -a decrease in the marginal propensity to save -political and economic stability

political and economic stability

according to supply-side theorists, a decrease in marginal tax rates will provide the incentive to

produce more

supply-side tax cuts are designed to

reduce marginal tax rates

according to supply-side economists, federal regulation of transportation services

reduces AS

according to supply-side theorists, an increase in mandatory employee benefits would result in a

rightward shift in the philips curve

income taxes are an automatic stabilizer because when income rises, ceteris paribus, tax receipts

rise because taxes are computed on the basis of income

the best indication that stagflation is occurring

rising unemployment rate and rising inflation rate

corporations in the the united states spend a lot of money to familiarize management with global markets. this should

shift the economy's ppc outward

the deficit that would exist if the economy were at full employment

structural deficit

__ policy is designed to shift the ppc outward and shift the long-run AS curve to the right

supply-side

what group designs policies that are best at eliminating stagflation

supply-side economists

who believed that lower tax rates will increase the incentives to work, invest, and produce

supply-siders

fiscal and monetary policies are most effective in reducing inflation when the aggregate __ curve is __

supply; vertical

#35 ch. 18 hw

#35 ch.18 hw

if the average worker's productivity is $12 per hour and the labor force is employed for 600 billion hours, GDP is equal to

$7.2 trillion

equation for the tax elasticity of supply

% change in amt supplied / % change in tax rate

if real GDP rises from $700 billion to $704 billion, the economic growth rate is (equation)

($704 - $700) / $700

sources of productivity gains (3)

-more capital -technological advance -improved mangement

fiscal policy includes (3)

-tax cuts -tax increases -discretionary spending by the government

if a tax cut of 3% causes the output supplied to increase by 6%, the absolute value of the tax elasticity of supply is

2

year 2 year 3 -real GDP: $580 - real GDP: $605 -pop: 24 - pop: 25 the growth rate of the economy from year 2 to year 3 was

4.3%

tariffs and quotas on imported goods shift the __ curve to the __

AS; left

the best measure of living standards is

GDP per capita

what measures productivity

GDP per worker

a reduction in marginal tax rates will yield larger tax revenues if the

absolute value of the tax elasticity of supply is greater than 1.0

changes that are triggered by the economy and not by government decision makers is an example of

an automatic stabilizer

the time it takes for congress to deliberate over a specific fiscal policy action is an example of

an implementation problem

a rightward shift of long-run AS would most likely result from

an increase in labor skills

a leftward shift of AS could be caused by

an increase in the marginal tax rate

a decrease in marginal tax rates will cause __ in investment and a __ shift in AS

an increase; rightward

which of the following will occur because of a rightward shift of the philips curve -a rightward shift of aggregate demand -a decrease in both unemployment and inflation -a trade-off btwn unemployment and inflation -an outcome known as stagflation

an outcome known as stagflation

used for comparing the data for other years

base period

new classical economists differ from traditional classical economists because new classical economist

believe people's rational expectations will lead them to offset government policy

modern keynesians differ from traditional keynesians because modern keynesians

believe that monetary policy can be useful in managing the economy

specialization in production and then trading with other countries

change the mix out output for each country and increase total world output

a rightward shift in aggregate demand will cause an increase in output and no change in the price level if aggregate supply is

horizontal

the knowledge and skills possessed by the labor force

human capital

increased opportunities for trade increase production by

improving efficiency through specialization

advocates of "fixed policy rules" believe

in constant increases in the money supply and balanced federal budges

when the federal government runs a budget surplus, there may be a "crowding __" effect that contributes to the growth of __ capital investment

in; private

if an increase in government regulations causes the AS curve to shift to the left, the misery will

increase

what is a keynesian approach for dealing with a recession

increase government expenditure

if the absolute value of the tax elasticity of supply is 0.8, a tax decrease of 10% will

increase output by 8% and decrease tax revenues

tax credits for new investment are likely to

increase physical capital investment

assume the real U.S. GDP in 1997 was $7,269 billion and the U.S. population was 268 million, and the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million. from 1997 to 1998, the per capita real GDP

increased

supply-side policy to reduce inflation would focus on

increasing the incentives to produce goods and services

which of the following policies is a positive supply-side lever? -cutting the discount rate -increased government transfers -infrastructure development -increased government regulation of industry

infrastructure development

the "new growth theory" of economic growth emphasizes the importance of

investing in ideas

when one country can produce a given amount of a good using fewer inputs that any other country

it has an absolute advantage in producing the good

if the real GDP in Afghanistan grew at an annual rate of 1.5% and the country's population grew at an annual rate of 2.5%, how long would it take for GDP per capita to double

it will never double because population is increasing more rapidly than real GDP

what is a policy used to combat structural unemployment

job training programs

a horizontal aggregate supply curve below the level of full employment is most consistent with which view of the economy

keynesian

rightward AS shifts will cause __ philips curve shifts

leftward

a world view article titled "economic hit from japan quake seen up to $200 billion" implies that the most likely impact from power shortages from this destruction would be a __ shift of aggregate __

leftward; supply

if the number employed grows faster than the population, then the

living standard will rise

which of the following also occurs as the ppc shifts outward? -long-run AS incrases -GDP per capita remains constant -output decreases -the unemployment rate rises

long-run AS increases

an economy experiences economic growth whenever -nominal GDP rises -long-run real GDP rises -base-year GDP rises -the unemployment rate falls

long-run real GDP rises

when comparing the ration of trade to GDP, relative to other countries, the united states typically has

lower ratios for both imports and exports

by making infrastructure improvements, the government would change the misery index by

lowering the unemployment rate and lowering the inflation rate

open market operations is a __ policy action

monetary

employee benefits mandated by the government make it

more difficult to achieve full employment with stable prices

what is a major goal of short-run macroeconomic policy

move toward the ppc

what is both a supply-side and a fiscal policy tool during recession

tax cuts

what measures the growth rate of an economy

the % change in the real GDP from one period do another

which view of aggregate supply predicts that the outcomes of fiscal and monetary policy depend on how close the economy is to full employment

the hybrid view

the long-term rate determined by structural forces in labor and product markets

the natural rate of unemployment

two countries will have 0 incentive to trade if their ppcs are parallel straight lines because

the opportunity costs for both countries are the same

shows a historical (inverse) relationship btwn the rate of unemployment and the rate of inflation

the philips curve

monetary policy tools include (2)

the reserve ration and the discount rate

a movement up the ppc illustrates

the short-run opportunity cost of achieving long-run economic growth

a leftward shift in aggregate demand will cause a decrease in both output and price level if aggregate supply is

upward-sloping to the right

the number of times per year, on average, that a dollar is used to purchase final goods and services is the

velocity of money


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