econ test 3
in the diagram, solid arrows reflect real flows and broken arrows are monetary flows. flow 1 might represent
Government provision of highways for truck transportation
if the economy is initially at full employment, which of the diagrams best portrays a recession asa result of an increase in the cost of production
Graph (2) AS shift left
an increase in the price in the aggregate expenditures model would
Increase aggregate expenditures and decrease real GDP.
assuming that MPC is .75, equal increases in government spending and tax collection by $10 billion will a) leave the equilibrium real GDP unchanged b) increase the equilibrium real GDP by $10 billion c) increase the equilibrium real GDP by 2.5 billion d) reduce the equilibrium real GDP by $10 billion
Increase the equilibrium GDP by $10 billion
the economy experiences a decrease in the price level and an increase in real domestic output. which is a likely explanation? a) consumer income and the quantity of labor have decreased b) business cost and wages rates have decreased c) the price of imported resources have increased d) national income abroad has increased
Interest rates and wage rates have decreased
if the real interest rate falls then the
Investment schedule will shift upward
if the slope of a linear consumption schedule increases in a private closed economy then it can be concluded that the
MPC has increased
in the figure AD1 and As1 represent the original aggregate supply and demand curve. if Q1 is full- employment output, then the long run aggregate supply curve is located at output level
Q2
if the dollar depreciates relative to foreign currencies, then aggregate
demand increases
in the effort to avoid recession, the government implements tax rebate program, effectively cutting taxes for households. we would expect this to
increase aggregate demand
In the figure, AD2 and AS2 represent the original aggregate supply and demand curves. If Q3 is full-employment output, then AD2 and AS1 best represents a period of A) Hyperinflation B) stagflation C) Low unemployment D) expansion
stagflation
If the economy falls into a recession, automatic stabilizers will cause
tax receipts to fall and government spending to rise
if the government wishes to increase the level of real GDP, it might reduce
taxes
in the diagram, solid arrows reflect real flows and broken arrows are monetary flows. flow 7 might represent
the U.S. Bureau of Engraving and Printing's expenditures for paper.
A tax structure is called progressive when
the average tax rate decreases if income decreases
the marginal propensity to save is .2 equilibrium real GDP will decrease by $50 billion if aggregate expenditure schedule decrease by
$10 billion
which of the following effects best explains the downward slop of the aggregate demand curve
An interest-rate effect
social security contributions are part of
payroll taxes
which would be considered to be one of the factors that shifts the aggregate supply curve in the short run? a change in
personal income taxes
if everyone pays a fixed dollar amount of tax, then the tax is a
proportional tax
the following data represents a person income tax schedule. Answer the next question on the basis of this information. the average tax rate at the $60,000 level of income is
15%
answer the following question using the following budget information for a hypothetical economy. Assume that all budget surplus are used to pay down the public debt. as a percentage of GDP, the budget deficit was in year 3
2.5 spending - revenue = / GDP X 100
Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals
4
to answer the next question use the information in the table below which illustrates the multiplier process resulting from an autonomies increase in investments by $5... the multiplier in the economy is
4
which of the following fiscal changes would be the most expansionary
A $40 billion increase in government spending
Refer to the graph shown. An economy is in both short- and long-run equilibrium at
C only
due to atomic stabilizers, when the nation's total income rises, government transfer payments
Decreases and tax revenues increase
the marginal propensity to consumer is represent by
EG/DG
as income falls from level 3 to level 2 the amount of
Saving decreases
the economy is at equilibrium at point C. which is below potential output. what fiscal policy would increase real GDP
Shift aggregate demand by increasing transfer payments
in the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum Taxes T of the same amount will have
different effects on GDP, with the change in G having a larger impact than the change in T
which of the following is the largest expenditure item of local governments
education
when the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to be
expansionary
when the federal government uses taxation and purchasing actions to stimulate the economy it is conducting
fiscal policy.
government should undertake neither an expansionary nor a contractionary fiscal policy.
government should undertake neither an expansionary nor a contractionary fiscal policy.
If a tax is progressive, then
its average rate increases as income increases the average tax rate decreases as taxable income decreases
one timing problem in using fiscal policy to counter a recession in the "implementation lag" that occurs between the
time fiscal action is taken and the time that the action has its effect on the economy
the long-run aggregate supply curve is
vertical