Econ 2133 assign 3
Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the:
maybe:::: cyclically adjusted deficit exceeds the cyclical deficit.
Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = .6, how much will the change in investment increase aggregate demand?
$50 billion.
Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:
$6 billion
Which of the following is incorrect?
When the price level increases, real balances increase and businesses and households find themselves wealthier and therefore increase their spending.
If the MPC in an economy is .75, government could shift the aggregate demand curve leftward by $60 billion by:
increasing taxes by $20 billion.
Per-unit production cost is:
total input cost divided by units of output.
consumption by $80 billion.
consumption by $80 billion.
Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:
$40 billion.
A $1 billion increase in investment will cause a:
(1/MPS) billion increase in GDP.
If the marginal propensity to consume is .9, then the marginal propensity to save must be:
0.1
Refer to the given data. The marginal propensity to consume is:
0.8
The multiplier can be calculated as:
1/(1-MPC)
Refer to the table. Which of the following schedules constitutes aggregate demand in this country?
128/19
Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: input quantity:100,150,200, Real Domestic Product:200,300,400, Refer to the table. If the price of each input is $5, the per-unit cost of production in the economy is:
2.5
If the MPC is .6, the multiplier will be:
2.5
In the diagram, the economy's short-run AS curve is line ___ and its long-run AS curve is line ___.
2; 1
In the diagram, the economy's relevant aggregate demand and immediate-short-run aggregate supply curves, respectively, are lines:
4 and 3.
If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is:
5
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays an improvement in expected rates of return on investment?
A
Which of the following represents the most contractionary fiscal policy?
A $30 billion decrease in government spending.
Which one of the following would not shift the aggregate demand curve?
A change in the price level.
The MPC can be defined as that fraction of a:
A) change in income that is not spent.
Refer to the diagram, in which Qf is the full-employment output. A contractionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at:
AD3.
Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?
An appreciation of the U.S. dollar.
Which of the following would not shift the aggregate supply curve?
An increase in the price level.
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of a dramatic increase in energy prices?
B
Which of the following historically has not been a significant contributor to the U.S. public debt?
Demand-pull inflation.
Refer to the diagram. Assume that G and T 2 are the relevant curves, the economy is currently at A, and the full-employment GDP is B. This economy has a(n):
Maybe:::: actual budget deficit.
Which of the following best describes the built-in stabilizers as they function in the United States?
Personal and corporate income tax collections automatically rise and transfers and subsidies automatically decline as GDP rises.
Which of the following statements is correct?
The cyclically adjusted budget is less likely to show a deficit than is the actual budget.
The multiplier effect indicates that:
a change in spending will change aggregate income by a larger amount.
In the diagram, a shift from AS 1 to AS 2 might be caused by:
a decrease in the prices of domestic resources.
Refer to the data for a fictional economy. The changes in the budget conditions between 1998 and 1999 best reflect:
a recession.
An appropriate fiscal policy for severe demand-pull inflation is:
a tax rate increase.
Refer to the diagram. Assume that G and T 1 are the relevant curves, the economy is currently at B, and the full-employment GDP is A. This economy has a(n):
actual budget surplus.
Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.:
aggregate demand curve would shift to the right.
Other things equal, if the U.S. dollar were to depreciate, the:
aggregate supply curve would shift to the left.
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:
an excess of government expenditures over tax receipts.
The interest-rate effect suggests that:
an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.
Menu costs:
are the costs to firms of changing prices and communicating them to customers.
The multiplier is useful in determining the:
change in GDP resulting from a change in spending
The multiplier is defined as:
change in GDP/initial change in spending.
The U.S. public debt:
consists of the historical accumulation of all past federal deficits and surpluses.
The federal government has a large public debt that it finances through borrowing. As a result, real interest rates are higher than otherwise and the volume of private investment spending is lower. This illustrates the:
crowding-out effect.
Other things equal, appreciation of the dollar:
decreases aggregate demand in the United States and may reduce aggregate supply by increasing the prices of imported resources.
Countercyclical discretionary fiscal policy calls for:
deficits during recessions and surpluses during periods of demand-pull inflation.
The aggregate demand curve is:
downsloping because of the interest-rate, real-balances, and foreign purchases effects.
Refer to the figure. Suppose that the economy is currently operating at the intersection of AS and AD 2, and that the full-employment level of output is Y. If the government wants to move the level of real GDP back to Y and reduce demand-pull inflation, in the presence of a ratchet effect, it should:
enact a contractionary fiscal policy that will shift aggregate demand to the left, but not as far as AD1.
Refer to the diagram, in which Qf is the full-employment output. If the economy's present aggregate demand curve is AD 2:
government should undertake neither an expansionary nor a contractionary fiscal policy.
The size of the MPC is assumed to be:
greater than zero, but less than one.
The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will:
increase U.S. imports and decrease U.S. exports.
In the diagram, a shift from AS 2 to AS 3 might be caused by a(n):
increase in business taxes and costly government regulation.
Refer to the diagram. Other things equal, a shift of the aggregate supply curve from AS 0 to AS 1 might be caused by a(n):
increase in government regulation.
Refer to the diagram. A shift of the aggregate demand curve from AD 1 to AD 0 might be caused by a(n):
increase in investment spending.
A rightward shift of the AD curve in the very steep upper part of the short-run AS curve will:
increase the price level by more than real output.
Other things equal, an increase of Treasury bonds from $100 billion to $120 billion in the economy would:
increase the public debt from $460 billion to $480 billion.
Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government's public debt would have:
increased by $20 billion.
The crowding-out effect of expansionary fiscal policy suggests that:
increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
The multiplier applies to:
investment, net exports, and government spending.
Payment of interest on the U.S. public debt:
is thought to increase income inequality
If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift:
leftward by $40 billion at each price level.
Graphically, cost-push inflation is shown as a:
leftward shift of the AS curve.
Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Other things equal, a decline in investment spending caused by the interest-rate effect of a price-level increase is depicted by the:
move from point a to point b in panel (B).
An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the:
multiplier effect.
When aggregate demand declines, some firms may reduce employment rather than wages because wage reductions may:
not be possible due to the minimum wage law.
Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Cost-push inflation is depicted by
panel (B) only.
Suppose the price level is fixed, the MPC is .5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly), government should:
reduce taxes by $40 billion.
Refer to the diagrams, in which AD 1 and AS 1 are the "before" curves and AD 2 and AS 2 are the "after" curves. Other things equal, a decline in net exports caused by a change in incomes abroad is depicted by
panels (B) and (C).
The aggregate supply curve (short run) is upsloping because:
per-unit production costs rise as the economy moves toward and beyond its full-employment real output.
The political business cycle refers to the possibility that:
politicians will manipulate the economy to enhance their chances of being reelected.
Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the information. All else being equal, if the price of each input increased from $4 to $6, productivity would:
remain unchanged.
Graphically, demand-pull inflation is shown as a:
rightward shift of the AD curve along an upsloping AS curve.
The aggregate supply curve:
shows the various amounts of real output that businesses will produce at each price level.
If Trent's MPC is .80, this means that he will:
spend eight-tenths of any increase in his disposable income.
The crowding-out effect is:
strongest when the economy is at full employment.
The federal budget deficit is found by:
subtracting government tax revenues from government spending in a particular year.
Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the information. Given an increase in input price from $4 to $6, we would expect the aggregate:
supply curve to shift to the left.
When the economy is at full employment:
the actual and the cyclically adjusted budgets will be equal.
The equilibrium price level and level of real output occur where:
the aggregate demand and supply curves intersect.
When current government expenditures exceed current tax revenues and the economy is achieving full employment:
the cyclically adjusted budget has a deficit.
Refer to the diagram. Discretionary fiscal policy designed to slow the economy is illustrated by:
the shift of curve T2 to T1.
The cyclically adjusted budget refers to:
the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment
When aggregate demand declines, wage rates may be inflexible downward, at least for a time, because of:
wage contracts.
Built-in stability means that:
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.
