Econ Unit 7 & 8

harms the economy, because it causes inflation.

According to our text, significantly increasing the money supply does the following to the economy in the long run:

transfers money from one sector (the private sector) to another (the government sector). This does not add money to our money supply and is not inflationary.

According to our text, when the U.S. government borrows funds from the public (by issuing bonds), it:

None of the above is true.

According to our text, which of the following is correct about inflation measures? The GDP price deflator provides a list of products whose prices have decreased over time. Most of these products are high-tech products and services. Inflation measures like the CPI and the PPI take quality changes of products into account. If a product increases in quality over time, the price increase is adjusted to reflect the greater quality of the product. Inflation measures are accurate because government statisticians receive information from millions of retail stores who report price changes of their products.

1983 and 2006.

According to the Bureau of Labor Statistics, between which of the following two years did prices double?

-0.4%

According to the Bureau of Labor Statistics, what was the average percentage change in the CPI for 2009 in the United States?

Japan

According to the table in section 3, Unit 8, which of the following countries has a greater debt to GDP ratio than the United States?

Falling prices that occur as a result of technological growth and an increase in production.

As a result of what economic conditions can falling prices be beneficial to the economy?

Japan

Compared to most countries in the world, one of the countries with the highest amount of debt as a percentage of GDP during this past fiscal year is:

significant increases in the quantity of money.

Considering how much our volume of goods produced has increased during the past several decades, the price level should have fallen drastically over this time. The reason why it has not is because of:

All of the listed answers are correct.

Falling prices are beneficial if:

The George W. Bush administration never ran a budget surplus. (The federal government spending actually increased during the Clinton years. Despite this, we experienced surpluses, thanks to a robust economy.)

How was the George W. Bush administration able to create and maintain its budget surpluses between 2005 and 2007?

too much money in circulation and increased velocity.

Hyperinflation is usually caused by a combination of:

Average prices of final goods and services must have fallen.

If during a particular year nominal GDP is smaller than real GDP, then according to the definition of the GDP deflator:

Both county and state governments are required to balance their budgets.

In the United States, which of the following form(s) of government is/are required to balance its (their) budget by law?

We have a debt of $50.

Let's say that in year 1 our government spending is $300 and our revenue is $200. In year 2 our government spending is $450 and our revenue is $500. In year 3 our government spending is $550 and our revenue is $550. Assuming no other deficits and surpluses, what is our government's national debt/surplus?

Prices will fall and average real incomes will increase.

Let's say that we are operating in a constant money supply economy. This year technology causes our aggregate supply to increase. Ceteris paribus, which of the following do you expect to happen?

Investors (potential purchasers of government securities) expect that the government may be unable to pay back its loans (securities). Consequently, investors will stop buying government securities or demand very high interest rates.

More and more nations are facing problems due to their high government debt ratios. What is likely to happen if a country's debt gets too high?

when inflation increases, then unemployment decreases, and vice versa.

The Phillips curve implies that:

the monetary authorities failed to adhere to the limited growth rule. In other words, they increased the money supply more than the gold supply grew. (Notice that when the money supply remains constant, and production increases, then prices go down. This is desirable deflation, because it is as a result of increasing supply of goods and services.)

The main reason why the Gold Standard failed in many industrialized countries is that:

the nation's debt as a percentage of its GDP.

When economists look at a government's health in terms of its national budget, then the one most important statistic they consider is:

Net interest payments by the government

Which of the following is likely to grow as a direct result of our growing national debt?

future taxes will rise.

Which of the following is the most likely outcome of a government running a large deficit and borrowing large amounts of money from domestic and foreign investors?

The national government spends more than it receives in tax revenues. It borrows from domestic and foreign investors in the form of government treasuries. The government pays interest to these investors.

Which of the following situations is most like that of the United States and other industrialized countries?

The federal deficit is usually smaller than the federal national debt for any country.

Which of the following statements is correct about national debts and/or deficits?

If a government runs a deficit, then, unless it is in a default state, it can obtain this borrowed money from: its central bank(s) (indirectly), when the central bank buys bonds. The central bank prints money to pay for the bonds. foreign investors, when foreign investors buy bonds from the government. businesses, when businesses buy bonds from the government. the public, when the public buys bonds from the government.

all of the groups listed in this question lend money to our federal government.

Our federal government uses various strategies to finance its budget deficit. Which of the following is the most common strategy?

borrowing from the public through the issuance of treasury securities (government bonds).

Crowding out is when our government:

borrows from the private sector and thus reduces (crowds out) private sector funds.

Supporters of an annually balanced budget believe that:

our government's expenses during a fiscal year should equal its revenue during the same fiscal year.

According to our our text, federal fiscal responsibility means:

setting money aside during healthy economic times before a recession begins (saving money for a rainy day). Individuals and families are advised to do the same when possible.

According to our text, when the U.S. government borrows funds from the public (by issuing bonds), it:

transfers money from one sector (the private sector) to another (the government sector). This does not add money to our money supply and is not inflationary.