Econ

According to the​ "Rule of​ 70", how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is​ 5%?

14 years

If the growth rate of real GDP rises from​ 3% to​ 4% per​ year, then the number of years required to double real GDP will decrease from

23.3 years to 17.5 years.

​[Related to Solved Problem ​#4​] Suppose that real GDP is currently ​$13.5 trillion and potential real GDP is​ $14.0 trillion, or a gap of ​$500 billion. The government purchases multiplier LOADING... is 10.0​, and the tax multiplier is 9.0. Holding other factors​ constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential​ GDP? Government spending will need to be increased by ​$ 50 billion. ​(Enter your response rounded to the nearest whole​ number.) Holding other factors​ constant, by how much will taxes have to be cut to bring the economy to equilibrium at potential​ GDP? Taxes will need to be cut by ​$ 56 billion. ​(Enter your response rounded to the nearest whole​ number.)

50,56

Use the graph on the right to answer the following questions. a. Which of points​ A, B,​ C, or D can represent a​ long-run equilibrium?

A and C

The graph to the right illustrates the static​ AD-AS model. Suppose the economy is initially in​ long-run equilibrium at point A. The government decides to decrease government spending. In the​ short-run, this contractionary fiscal policy will​ cause:

A shift from AD 2 to AD 1 and a movement to point​ D, with a lower price level and lower output.

Refer to the diagram to the right.​ "Crowding out" of firm investment as a result of a budget deficit is illustrated by the movement from​

A to B

Refer to the diagram to the right. Diminishing marginal returns is illustrated in the perminusworker production function by a movement from

A to C

Suppose that​ initially, the economy is in​ long-run macroeconomic equilibrium at point A. If there is increased pessimism about the future of the​ economy, the AD curve will shift from AD 0 to AD 1 . The new​ short-run macroeconomic equilibrium occurs at point B . ​Long-run adjustment will shift the SRAS curve from SRAS 0 to SRAS 1 as workers adjust to​ lower-than-expected prices. The new​ long-run macroeconomic equilibrium occurs at point C .

AD0 to AD 1 point B SRAS0 TO 1 POINT C

Increased government debt can lead to higher interest rates​ and, as a​ result, crowding out of private investment spending. In terms of borrowing​ (debt-spending), what will offset the effect of crowding out in the long run so that government debt poses less of a problem to the​ economy?

All of the above.

Refer to the diagram to the right. Technological change is illustrated in the per minus worker production function by a movement from

B to C

What is a contractionary fiscal​ policy?

Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.Co

b. Suppose that initially the economy is at point A. Then aggregate demand increases from AD1 to AD2. The new​ short-run equilibrium will be at point D . The​ long-run equilibrium point will be at point C .

D and C

Which of the following best explains how the economy will adjust from the​ short-run equilibrium point to the new​ long-run equilibrium​ point?

Due to the higher priceDu ​ level, workers will demand higher​ wages, and firms will raise prices and cause SRAS to shift to the left to point C.

Consider the figures below. Determine which combination of fiscal policies shifted AD 1 to AD 2 in each figure and returned the economy to​ long-run macroeconomic equilibrium.

ExampleEx ​ (A): Expansionary fiscal policy. Example​ (B): Contractionary fiscal policy.

What is an expansionary fiscal​ policy?

Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.

What is fiscal​ policy?

Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.

The term​ "crowding out" refers to a situation​ where:

Government spending increases interest rates and decreases private investment

[Related to Solved Problem ​#4​] Suppose that real GDP is currently ​$13.2 trillion and potential real GDP is​ $14.0 trillion, or a gap of ​$800 billion. The government purchases multiplier LOADING... is 5.0​, and the tax multiplier is 4.0. Holding other factors​ constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential​ GDP?

Government spending will need to be increased by ​$ 160 billion. ​(Enter your response rounded to the nearest whole​ number.) Holding other factors​ constant, by how much will taxes have to be cut to bring the economy to equilibrium at potential​ GDP? Taxes will need to be cut by ​$ 200 billion. ​(Enter your response rounded to the nearest whole​ number.)

According to the multiplier effect LOADING...​, an initial increase in government purchases increases real GDP by more than the initial increase in government purchases.

More than

Complete the following table for a static​ AD-AS model:

Recession Expansionary up arrow Gov't spending or decrease taxes Real GDP and price level rise Rising inflation Contractionary Decrease gov't spending or up arrow Taxes Real GDP and price level fall

Who is responsible for fiscal​ policy?

The federal government controls fiscal policy.Th

Why might cutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing​ inflation?

The legislative process experiences longer delays than monetary policy.Th

Which of the following are examples of discretionary fiscal​ policy? ​(Check all that​ apply.)

The president and Congress reduce tax rates to increase the amount of investment spending. The government provides stimulus funds to repair roads and bridges to increase spending in the economy. Congress provides a tax rebate to encourage additional spending in order to reduce the unemployment rate.Co

Why does a​ $1 increase in government purchases lead to more than a​ $1 increase in income and​ spending?

Through the government purchases​ multiplier, the​ $1 increase in government spending will lead to an increase in aggregate demand and national​ income, which will lead to an increase in induced spending.

Which of the following would cause a decrease in aggregate​ demand?

a decrease in government spending

When actual GDP is below potential GDP the budget deficit increases because​ of:

an increase in transfer payments and a decrease in tax revenues.an

Government spending and taxes that increase or decrease without any actions taken by the government are referred to as

automatic stabilizers.au

The​ long-run aggregate supply curve is vertical because in the long​ run,

changes in the price level do not affect potentialch ​ GDP, as potential GDP depends on the size of the labor​ force, capital​ stock, and technology.

When additions of input to a fixed quantity of another input lead to progressively smaller increases in​ output, we say we are facing

diminishing returns

Actual real GDP will be above potential GDP if

firms are producing above capacity.fi

Creative destruction means that

firms develop new products that replace old products in thefi ​ economy, thereby encouraging economic growth.

Aggregate demand​ (AD) is comprised of expenditure components that​ include:

governmentgo ​ spending, consumption,​ investment, and net exports.

Which of the following increases labor​ productivity?

inventions of new​ machinery, equipment, or software

In a closed​ economy, public saving plus private saving is equal to

investment.in

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity.la

Consider the following data for a closed​ economy: Y​ = $12 trillion C​ = $8 trillion I​= ​$2 trillion G​ = $2 trillion TR​ = $2 trillion T​ = $3 trillion Refer to the scenario above. Based on the information​ above, what is the level of public​ saving?

negative​ $1 trillion​ (a deficit of​ $1 trillion)

According to new growth​ theory,

technological change is influenced by economic incentives.

The position of the​ long-run aggregate supply​ (LRAS) curve is determined by

the number ofth ​ workers, the amount of​ capital, and the available technology.

Because of diminishing​ returns, an economy can continue to increase real GDP per hour worked only if

there is technological change.th

When the economy is experiencing an expansion automatic stabilizers will​ cause:

transfer payments to tr decrease and tax revenues to increase.

Consider the following data for a closed​ economy: Y​ = $12 trillion C​ = $8 trillion I​= ​$2 trillion G​ = $2 trillion TR​ = $2 trillion T​ = $3 trillion Refer to the scenario above. Based on the information​ above, what is the level of private saving in the​ economy?

​​$3 trillion

Policy that is specifically designed to affect aggregate supply and increase incentives to​ work, save, and start a​ business, by reducing the tax wedge LOADING... is called

​​supply-side economics.

Refer to the table aboev. Which two countries are consistent with the predictions of the economic growth​ model?

Botswana and ThailandBo