Econ 202 (2)

Aggregate expenditure equals

C + I + G + X - M.

Who is the current chairman of the Federal Reserve?

Jerome Powell

If the expected future inflation rate decreases, then

aggregate demand decreases.

If the economy falls into a recession, which of the following responses constitutes the use of automatic fiscal policy?

an existing system to make government payments to the growing ranks of unemployed workers

In the United States today, money consists of

currency and deposits at banks.

If the multiplier is 6 and exports decrease by $30, what impact will that have on aggregate expenditure? Aggregate expenditure will

ease by $180.

Liquidity is the

ease with which an asset can be converted into a means of payment with little or no loss of value.

When real GDP is less than potential GDP, an increase in government expenditures will ________ real GDP and ________ the price level.

increase; raise

The multiplier effect exists because a change in autonomous expenditure

leads to changes in income, which generate further spending.

The demand-side effect of a change in taxes is less than the same sized change in government expenditure because

only part of the increase in disposable income from the tax cut is spent

One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,

people substitute toward more imported goods and services.

At the start of a cost-push inflation

prices and unemployment are rising.

Control of the nation's quantity of money is handled by

the Federal Reserve System

As a result of a tax increase

the aggregate demand curve shifts leftward.

A one-time rise in the price level can turn into a demand-pull inflation when

the quantity of money persistently increases

If aggregate planned expenditure is less than real GDP then

firms' inventories will increase and real GDP will decrease as production falls

A reason the government expenditure multiplier is larger than 1 is because

government expenditure changes generate changes in consumption expenditure.

According to the Laffer curve, raising the tax rate

might increase, decrease, or not change the amount of tax revenue.

If the marginal propensity to save is 0.2, every $10 increase in disposable income increases

consumption expenditure by $8.00.

Bank reserves include I. the cash in the bank's vault. II. the bank's deposits at the Federal Reserve

both I and II