Econ Final

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Stagflation is the result of

A decrease in aggregate supply.

Countries that have higher saving rates are likely to have

A higher investment rate as a percentage of GDP and a higher growth rate of real GDP.

The effect of a higher discount rate could best be represented by, ceteris paribus,

A movement up the investment demand curve.

Frictional unemployment goes up when

A worker quits one job to search for another in the same line of work.

According to supply-side theorists, taxes

Alter disposable income and affect the incentives to work and produce.

The closer the economy is to capacity, the greater the risk that fiscal or monetary stimulus will cause

An increase in the price level and no change in output.

The optimal mix of output is always the same as the

Most desired combination on a production possibilities curve.

If the multiplier is greater than 1 an initial (autonomous) decrease in aggregate demand will be

Much smaller than the eventual decline in spending.

The emphasis on the importance of advances and dissemination of knowledge is a cornerstone of the

New growth theory.

External shocks include all of the following except

Population growth.

Economists often define economic growth in terms of changes in

Potential GDP.

When a surplus exists for a product,

Producers reduce the level of output and reduce price.

Market failure may lead to

Public goods being underproduced.

Desired investment equals

Purchases of new plants and equipment plus desired changes in business inventories.

Crowding out is most likely to occur when the federal government

Runs a deficit and sells bonds to make up the difference.

Money is functioning as a store of value when you

Save your cash to pay for tuition next semester.

The Fair Labor Standards Act of 1938

Set a minimum wage of 25 cents per hour.

Corporations in the United States spend a lot of money to familiarize management with global markets. This should

Shift the economy's production possibilities curve outward.

A long-run expansion in capacity

Shifts the production possibilities curve rightward.

A tax is regressive if it takes a

Smaller fraction of dollars as income rises.

The speculative demand for money is related to money functioning as a

Store of value.

When we calculate GDP, imports are

Subtracted from total spending because they are part of another country's GDP.

The proportion of the labor force that is unemployed is the

Unemployment rate.

Real GDP is the

Value of final output produced in a given period, adjusted for changing prices.

The inflationary GDP gap differs from the AD excess when

The aggregate supply curve slopes upward.

For the CPI, the market basket is expressed in terms of what the goods cost in

The base period.

According to Keynes, an unbalanced budget is appropriate in all of the following situations except when

The economy is at full employment.

Growth in GDP per capita is attained when

The growth of output exceeds population growth.

Human capital is

The knowledge and skills possessed by the labor force.

The tax elasticity of supply is

The percentage change in quantity supplied divided by the percentage change in tax rates.

If corn and wheat are alternative pursuits for a farmer, a change in the supply of corn will take place when, ceteris paribus,

The price of wheat changes.

What impact do transfer payments have?

They reduce the incentive to work and shift AS to the left.

Which of the following efforts did the Clinton administration embrace?

"New Direction" tax increases and spending cuts

Assume the MPC is 0.80. The change in total spending for the economy due to a $200 billion government spending increase is

$1 trillion.

Given a consumption function of C = $25 + 0.75YD, the average propensity to consume equals 1 when disposable income equals

$100.

Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent. Then required reserves are

$45,000.

If the growth rate of the labor force is 2 percent and the growth rate of productivity is 1.5 percent, the growth rate of total output is

3.5 percent

Given C = 200 + 0.75YD, the multiplier is

4.

When the money market is at an equilibrium in the liquidity trap,

An increase in the money supply does not affect interest rates.

The employment rate is measured as the percentage of the

Adult population that is employed.

Jack has an MPC of 0.82 and Jill has an MPC of 0.78. Ceteris paribus, if the government transfers income from people who behave like Jack to people who behave like Jill,

Aggregate demand will decrease.

The recessionary GDP gap will differ from the AD shortfall when the

Aggregate supply curve slopes upward.

Which of the following shifts, ceteris paribus, will cause lower rates of both unemployment and inflation?

An increase in aggregate supply.

Excess reserves are

Bank reserves in excess of required reserves.

The Federal Reserve holds deposits from

Banks.

If a price ceiling is to be effective, it should be set

Below the equilibrium price, and it will create a market shortage.

Currency in circulation is included in

Both M1 and M2.

Increased investment in infrastructure will shift

Both aggregate supply and aggregate demand to the right.

If a bank does not have enough reserves to satisfy the reserve requirement, it is likely to do any of the following except

Buy securities.

Suppose China can produce 200 TVs or 200 DVD players. South Korea can produce either 100 TVs or 200 DVD players. In terms of TV production, we can conclude that

China has a comparative advantage in TV production.

The components of aggregate demand are

Consumption, government spending, net exports, and investment.

Which of the following statements is not correct about the U.S. monetary system?

Credit cards are the most common form of money today.

A decrease in the marginal propensity to save is likely to

Decrease physical capital investment.

If your nominal income remains constant at $3,000 while the price of an important product in your budget, such as cell phone service, rises from $50 to $100, your real income has

Decreased by $50.

Supply-side economists try to increase the AS curve with all of the following policies except

Decreasing the supply of money.

The Gramm-Rudman-Hollings Act of 1985 created a

Deficit ceiling.

Supply-side economists favor tax incentives that

Encourage saving.

Ceteris paribus, if average prices in the U.S. economy fall, then the

Foreign trade effect will lead to a higher quantity of U.S. output demanded.

The natural rate of unemployment includes

Frictional and structural unemployment only.

A decrease in the marginal tax rates is likely to

Increase entrepreneurship.

If a country moves from a point below the production possibilities curve to a point on the curve, it is experiencing

Increased capacity utilization.

An example of a positive externality is

Increased factory use of private sector robotics that came from government research.

Which of the following would be most likely to result in stagflation?

Increased government regulations on industry.

Outsourcing leads to

Increases in productivity and increases in total output.

A recession can be represented by a point

Inside the production possibilities curve.

From the long-run perspective of economic growth, saving

Is a basic source of investment financing.

Economic growth

Is measured using real GDP.

The basic factors of production include

Land, labor, capital, and entrepreneurship.

Rightward AS shifts will cause

Leftward Phillips curve shifts.

The equation of exchange can be stated as

MV = PQ.

The federal funds rate is the interest rate charged when

One bank lends reserves to another bank.

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 opportunity cost relative to the United States.

Productivity is a measure of

Output per unit of input.

If the CPI doesn't measure product quality improvements, the CPI tends to

Overstate the inflation rate.

Supply-siders believe that

Tax rebates have no effect on work effort.

If autonomous consumption decreases, then

The AD curve will shift to the left.


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