Macro Economics

Suppose that an economy produces 2,400 units of output, employing 60 units of input, and the price of the input is $30 per unit. The per unit cost of production is

$0.75

If P equals the price level expressed as an index number and $V equals the value of the dollar, then:

$V = 1/P

The cyclically adjusted surplus in the US went from +1.2 percent of GDP in 2000 to -1.2 percent in GDP in 2002. This suggests that the government during that period

Cut taxes and/or increased spending

The government bailout of large institutions created the problem of moral hazard, which means that these large firms will

Have an incentive to make highly risky investments

The major wave of defaults on home mortgages in 2007 destabilized

Many banks including those that made the loans indirectly

The aggregate demand curve or schedule shows the relationship between the total demand for output and the

Price level

When government spending is increased, the amount of the increase in aggregate demand primarily depends on

The size of the multiplier

The paper money, or currency, in the United States essentially represents

a debt of the Federal Reserve System.

The US public debt

consists of the historical accumulation of all past federal deficits and surpluses.

A decrease in government spending will cause a(n):

decrease aggregate demand

Other things equal, if $100 billion of government purchases (G) is added to private spending (C+Ig+Xn), GDP will

increase by more than $100 billion.

Suppose the price level is fixed, the MPC is 0.5, and the GDP gap is a negative $80 billion. To achieve full-employment output (exactly), government should

reduce taxes by $80 billion.

The cyclically adjusted budget refers to

the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment

The most basic premise of the aggregate expenditures model is that:

total output produced in the economy depends directly on the level of total spending