MACRO Exam 3
The fraction, or percentage, of total income which is consumed is called the:
Average propensity to consume
The intent of contractionary fiscal policy is to:
Decrease aggregate demand
The Great Recession of 2007-2009 alter the prior behavior of consumers in the economy by
Shifting the consumption schedule down
In the aggregate demand - aggregate supply model, the economy's price level is assumed to be:
Variable, unlike in the aggregate expenditures model
In the aggregate expenditures model, the consumption schedule is shown to be
directly related to real income GDP
The relationship between the MPS and the MPC is such that:
1-MPC=MPS
In a private closed economy, the two components of aggregate expenditures are:
Consumption and investment
Discretionary fiscal policy is often initiated on the advice of the
Council of Economic Advisors
If the dollar depreciates in value relative to foreign currencies, then aggregate:
Demand increases
The amount of consumption in an economy correlates:
Directly with the level of disposable income
If the government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the:
Economy's MPS is small
Whe the federal government uses taxation and spending actions to stimulate the economy it is conducting
Fiscal policy
In a private closed economy, there will be an unplanned increased in inventories when:
GDP exceeds aggregate expenditures
A federal budget deficit is financed by the:
Government issuance or sale of Treasury securities
One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy:
Is not subject to the timing problems of discretionary policy
A change in interest rates would shift the consumption schedule and the savings schedule BLANK; a change in taxes would shift these two schedules BLANK
In the opposite directions; in the same direction
The so-called paradox of thrift that became quite obvious in the great recession of 2007-2009 refers to all of the following except
In trying to spend less now, consumers will end up spending more later on
The aggregate demand curve shows the:
Inverse relationship between the price level and the quantity of real GDP
In the aggregate expenditure model, which variable is assumed to be independent of real GDP
Investment
If the expected rate of return on investment decreases, than most likely the:
Investment schedule will shift downward
One of the potential consequences of the public debt is that it may:
Lead to additional future taxes that reduce economic incentives
An increase in personal income taxes would shift AD to the:
Left because C will decrease
When a consumption schedule is plotted as a straight line, the slope of the line is:
Less than the slope of the 45 degree line
When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called:
Nondiscretionary fiscal policy
The aggregate demand curve of schedule shows the relationship between the total demand for output and the:
Price level
The crowding-out effect from government borrowing to finance the public debt is reduced when:
Public investment complements private investment
The paradox if thrift highlights the idea that:
Saving more can be bad for the economy during a recession
When the price level decreases:
The demand for money falls and the and interest rate falls
Which of the following is graphed as a horizontal line across level of real GDP in the aggregate expenditures model
The investment schedule
The slope of the consumption schedule between two points on the schedule is:
The ratio of the change in consumption to the change in disposable income between those two points
When the dollar appreciates relative to foreign currencies, it means that:
The values of foreign currencies decreased relative to our dollar
When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are designed to be:
countercyclical
