Econ Exam 2
a decrease in interest rates will cause
AD to increase (move to the right)
an increase in government spending will cause
AD to increase (move to the right)
if the Federal Reserve wished to increase interest rates using open market operations it would
sell US government securities
the Obama stimulus plan's requirement that projects be "shovel-ready" was designed to combat which of these
the political business cycle
one subject of study for macroeconomics is
inflation
the institution that governs monetary policy is
the Federal Reserve
the GDP deflator is different than the CPI in that
the GDP deflator includes everything while the CPI only includes what average people buy
which of the following might create cost-push inflation?
an increase in taxes
which of the following would qualify as an aggregate demand shock?
an unexpected increase in oil prices
the reason that only final sales count in GDP is to
avoid double counting
a political problem with the discretionary fiscal policy is the
business cycle
the expenditures approach to GDP is to
Consumption + Gross Investment + Government Purchases + Net Exports
an example of discretionary fiscal policy would be
a tax increase adopted to control inflationary pressures
which of the following policies might create demand-pull inflation?
an increase in interest rates
any event that creates a "crisis in confidence" is likely to lead to
lower aggregate prices
a reason given why the CPI overstates the cost of living is it
makes no attempt to control for substitution to cheaper goods
in measuring GDP, goods produced by foreign firms in the United States are
counted, but goods produced by American firms in foreign countries are not counted
if a person is laid-off from a job and told that they will be brought back as soon as the economy picks up and demand for their product rises, then economists call this person
cyclically unemployed
which of the following is not a reason for the aggregate demand curve to be downward sloping?
diminishing marginal utility
a political problem with discretionary fiscal policy is the
expansionary bias
when domestic prices rise
exports rise
Open Market Operations refer to the buying and selling of
government securities
fiscal policy is purposeful movements in ____________ designed to direct an economy
government spending and taxes
how does GDP deal with a Ford produced in Mexico?
it is not counted at all
inflation is measured using ______ in a price index
the percentage year-to-year increase
a decrease in confidence will cause
AD to decrease (move to the left)
an increase in taxes will cause
AD to decrease (move to the left)
Congress and the President have control of the tax system and government spending, as a result their policies will directly impact
aggregate demand
expansionary monetary policy would shift the
aggregate demand curve to the left
the purpose of fiscal policy is to
alter the direction of the economy
which of the following would be described as the operational lag?
the time required to get a particular plan implemented with the money getting into people's hands
which of the following is not a reason that the CPI overstates the cost of living?
there are too frequent updates of the market basket
the reason that only final sales are counted in GDP is
to avoid double counting goods that are sol so as to be resold
fiscal policy is controlled by
Congress and the President
if a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket from 2014, while it cost $12,000 to purchase those identical goods in 2015, then the inflation rate from 2014 to 2015 is
unknown given this data
when the Federal Reserve wishes to, in the short run, decrease inflation it
will decrease the money supply by selling bonds
if a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $11,000 to purchase those identical goods in 2015, then the price index for the BASE YEAR is
100
if a person is unemployed because their industry has moved to another country, economists refer to the person as
structurally unemployed
a political leader suggesting that an economic downturn will be cushioned by nondiscretionary fiscal policy is referring to
tax policy and spending policy
an example of nondiscretionary fiscal policy would be
the existence of the progressive federal income tax
discretionary fiscal policy differs from NONdiscretionary fiscal policy in that
the former requires timely decisions whereas the latter is built into the system
which of the following would be described as the administrative lag?
the time required to agree upon a policy remedy for a reccession
an increase in regulation will cause
AS to decrease (move to up and to the left)
an increase in input prices will cause
AS to decrease (move up and to the left)
an increase to productivity will cause
AS to increase (move to down and to the right)
