Econ 302 Quiz 4

A Federal budget deficit exists when:

Federal government spending exceeds tax revenues in a given year

The long-run aggregate supply analysis assumes that:

Both input and product prices are variable

Federal income taxes are considered progressive because

average taxes paid increases when income increases

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:

Administrative lag

Which of the following events would most likely reduce aggregate demand?

An increase in real interest rates

Cost-push inflation is characterized by a(n):

Decrease in aggregate supply and no change in aggregate demand

The interest rate effect on aggregate demand indicates that a(n):

Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending

When national income in other nations decreases, aggregate demand in our economy:

Decreases because our exports will decrease

A Federal budget deficit is financed by the:

Government issuance or sale of Treasury securities

The immediate-short-run aggregate supply curve is:

Horizontal

The crowding-out effect suggests that:

Increases in government spending may reduce private investment

The aggregate demand curve shows the:

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

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

A decrease in expected returns on investment will most likely shift the AD curve to the:

Left because Ig will decrease

The real-balances effect on aggregate demand suggests that a:

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

Menu costs will:

Make prices inflexible downward

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):

Recognition lag

A fall in labor costs will cause aggregate:

Supply to increase

The upward slope of the short-run aggregate supply curve is based on the assumption that:

Wages and other resource prices do not respond to price level changes

The US government deficit as a percentage of GDP between 1945 and 2010 has

dropped

Which of the following is a major source of tax revenue for state and local governments

sales and excise taxes