econ final bonous q's

Which of the following best explains the statement "every government has a fiscal policy, whether it realizes it or not?"

-Every government sets tax and expenditure programs, which influence economics activity and the components of GDP.

Increased government budget deficits cause crowding out if:

-Private investment spending for capital goods is decreased

Suppose an economy in long-run equilibrium experiences a supply shock from substantially higher energy costs. In which of the following ways are real GDP and the price level most likely to change?

-Real GDP-> Decrease Price Level-> Increase

Which of the following is true in the short run when comparing an increase in government spending to an increase in private investment spending?

-They will both increase aggregate demand.

A monetary policy will increase GDP in the short run if:

-interest rates decrease, encouraging more investment

In the short run, aggregate demand in a country will increase if there is an increase in the:

-money supply of the country

In the short run, compared to an increase in government spending, a decrease in federal taxes will cause aggregate spending in the economy to change in the:

-same direction, but encourage private over public spending

Which of the following actions by a nation's central bank would be most effective in reducing inflation?

-selling government securities on the open market

If workers or businesses anticipate that an expansionary monetary policy will increase inflation, the effects of the policy on real output will be:

-smaller, if businesses lower prices on the products they make

The limit of total productive capacity in an economy is set by:

-the quantity and quality of its productive resources

Suppose commercial banks have no excess reserves. Then new deposits totaling $1 billion come into the banking system. The required reserve ratio is 20 percent. What is the maximum amount by which banks can increase deposits in the entire banking system?

5 billion

The consumer price index in an economy is 180 on year and 189 the next year. The rate of inflation in the economy over that year period is:

5 percent

If the price level is expected to increase by three percent next year and a key market interest rate is seven percent, the real rate of interest is:

-four percent

Which of the following actions by the Federal Reserve would have similar effects on the size of the U.S. money supply?

-increasing the reserve ratio and selling government securities

Over a five-year period GDP in a nation increased from $10 trillion to $15 trillion, while the GDP deflator increased from 100 to 125. Approximately how much is GDP in year five, stated in terms of year-one dollars?

12 trillion

In the short run, how will an increase in aggregate demand most likely affect the overall price level and real GDP?

Increase, increase

A small country that has experienced high inflation for the past decade decides to set the value of its currency equal to the value for the currency in a large nation that has had very low inflation for the past 50 years. The small country benefits because this action:

-Establishes greater confidence among domestic and international investors that the country's inflation will be brought under control.

How will market interest rates and bond prices most likely change if the Federal Reserve decides to make a small, one-time increase in the money supply?

-Market Interest Rates-> Decrease Bond Prices-> Increase

Which of the following is classified as investment in national income (GDP) accounting?

building a new factory

Assume that the economy is at full employment and is experiencing rapid inflation.Which of the following combinations of monetary and fiscal policies would reduce inflation most, assuming the dollar values for both policy changes are the same amount?

-Monetary Policy-> Sell government securities --Fiscal Policy-> Decrease the federal budget deficit

Which of the following best explains why a $7 billion tax cut can lead to $9 billioin increase in the consumer spending in the short run?

-Tax cuts increase disposable income, which leads to higher national income and additional consumer spending.

Which of the following is most likely to occur when firms in other countries want to build factories in the United States or purchase US financial securities?

-The demand for the dollar will decrease in other countries and the dollar will depreciate.

Which of the following would most likely result if the federal government increased spending without increasing tax revenues during a period of full employment?

-an increase in the price level

The basic money supply (M1) in the United States consists primarily of:

-currency and checkable deposits

Actual GDP in a country is estimated to be 10% below potential GDP. Prices are virtually unchanged from one year ago. Unemployment is 12% of the civilian work force, much higher than it has been in many years. Which of the following policies would be the most appropriate for improving these economics conditions?

-decreases in interest rates by the central bank

For the past fifteen months, unemployment has been under 5 percent. Consumer prices increased by 2 percent over the level a year ago. Total production of goods and services is projected to be 5% higher this year than it was last year.Which of the following policies would be most appropriate for short-run stabilization objectives?

-increasing both personal and corporate income taxes.

Use the information to answer the next question. All numbers are in millions. Population of the nation: 125 Size of the labor force: 75 Number of employed workers: 50 Number of unemployed workers: 25 What is the unemployment rate for this nation>

33 percent

If income and consumption in the U.S. economy are growing faster than in the economies of the nations that are major trading partners. U.S. imports are most likely to:

increase more than US exports