macro econ quiz 4

The long-run aggregate supply analysis assumes that: a. Both input and product prices are variable b. Input prices are fixed while product prices are variable c. Both input and product prices are fixed d. Input prices are variable while product prices are fixed

a. Both input and product prices are variable

Cost-push inflation is characterized by a(n): a. Decrease in aggregate supply and no change in aggregate demand b. Increase in aggregate supply and a decrease in aggregate demand c. Increase in aggregate demand and no change in aggregate supply d. Decrease in both aggregate supply and aggregate demand

a. Decrease in aggregate supply and no change in aggregate demand

The immediate-short-run aggregate supply curve is: a. Horizontal b. Downward-sloping c. Vertical d. Upward-sloping

a. Horizontal

The aggregate demand curve shows the: a. Inverse relationship between the price level and the quantity of real GDP purchased b. Direct relationship between real-balances and the quantity of real GDP purchased c. Direct relationship between the price level and the quantity of real GDP produced d. Inverse relationship between interest rates and the quantity of real GDP produced

a. Inverse relationship between the price level and the quantity of real GDP purchased

A fall in labor costs will cause aggregate: a. Supply to increase b. Demand to decrease c. Supply to decrease d. Demand to increase

a. Supply to increase

Federal income taxes are considered progressive because a. average taxes paid increases when income increases b. average taxes paid decreases when income increases c. marginal tax rate increases when income increases d. average taxes paid remain the same when income increases

a. average taxes paid increases when income increases

The US government deficit as a percentage of GDP between 1945 and 2010 has a. dropped b. remained the same c. increased d. increased the first 10 years then dropped

a. dropped

Which of the following events would most likely reduce aggregate demand? a. A reduction in business and personal tax rates b. An increase in real interest rates c. A reduction in the amount of existing capital stock d. An increase in expected returns on investment

b. An increase in real interest rates

The crowding-out effect suggests that: a. High taxes reduce both consumption and saving b. Increases in government spending may reduce private investment c. Increases in consumption are always at the expense of saving d. Increases in government spending will close a recessionary expenditure gap

b. Increases in government spending may reduce private investment

A decrease in expected returns on investment will most likely shift the AD curve to the: a. Right because C will increase b. Left because Ig will decrease c. Left because C will decrease d. Right because Ig will increase

b. Left because Ig will decrease

Menu costs will: a. Increase the legal minimum wage b. Make prices inflexible downward c. Increase the amount of training of workers d. Result in price wars between businesses

b. Make prices inflexible downward

When national income in other nations decreases, aggregate demand in our economy: a. Increases because our imports will decrease b. Decreases because our imports will increase c. Decreases because our exports will decrease d. Increases because our exports will increase

c. Decreases because our exports will decrease

The real-balances effect on aggregate demand suggests that a: a. Lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending b. Higher price level will increase the real value of many financial assets and therefore cause an increase in spending c. Lower price level will increase the real value of many financial assets and therefore cause an increase in spending d. Lower price level will decrease the real value of many financial assets and therefore cause an increase in spending

c. Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n): a. Operational lag b. Budget lag c. Recognition lag d. Administrative lag

c. Recognition lag

The foreign purchases effect on aggregate demand suggests that a: a. Rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand b. Fall in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand c. Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand d. Fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand

c. Rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand

Which of the following is a major source of tax revenue for state and local governments a. corporate income tax b. payroll taxes c. sales and excise taxes d. income tax

c. sales and excise taxes

The lag between the time that the need for fiscal action is recognized and the time action is actually taken is referred to as the: a. Operational lag b. Crowding-out lag c. Recognition lag d. Administrative lag

d. Administrative lag

A Federal budget deficit is financed by the: a. Government purchase of Treasury securities b. Nation's exports c. Private sector's investment spending d. Government issuance or sale of Treasury securities

d. Government issuance or sale of Treasury securities

One of the potential consequences of the public debt is that it may: a. Decrease interest rates and increase investment spending b. Make income distribution more equitable c. Increase the debt burden of foreign creditors d. Lead to additional future taxes that reduce economic incentives

d. Lead to additional future taxes that reduce economic incentives

An increase in personal income taxes would shift AD to the: a. Left because G will decrease b. Right because C will increase c. Right because G will increase d. Left because C will decrease

d. Left because C will decrease