Exam 3 Part 2 Economics Chp 27
And economic slowdown or recession
A rise in the price of oil would be most likely to cause which of the following in the United States?
It planned increase in the budget deficit
According to the Keynesian view, if policymakers thought the economy was about to fall into recession, which of the following would be most appropriate?
The inventories of firms would decline, in the firms would expand output in order to restore their inventories to desired levels
According to the Keynesian view, purchasers buy more goods and services than businesses expect,
Decrease in tax rates
According to the Keynesian view, which of the following would most likely stimulate real output if an economy were in a recession?
Say's law and flexible wages and prices will keep the economy at full employment most of the time
According to the classical model of the economy
Basic Keynesian
According to which of the following models is there no built in mechanism which will automatically bring the economy back to full employment?
And unfavorable supply shock that shifts SRAS to the left
An increase in the general level of prices and the goods and services market that is accompanied by a short run reduction in real GDP is most likely caused by
Increases in real interest rates and real resource prices
And output is greater than the economies long run capacity, which of the following is most likely to occur?
Is vertical, indicating that in the long run a change in the price level has no effect on the amount of output that producers will supply
And the standard AD/AS model, the long-run aggregate supply
Real output will decrease, and the general level of prices will increase
During 2003-2007, The price of crude oil increase substantially on the world market. Other things constant, how well and on anticipated increase in oil prices influence the general level of prices and real output of oil importing nations such as the United States and Japan?
Business borrowing for investment purposes tends to fall during recessions
During recessions, interest rates tend to fall because
Changes will occur that will automatically guide the economy back to full employment
If a market economy has a self-correcting mechanism, when output is lower than potential for employment output but
A temporarily high level of output and employment that cannot be maintained
If an economy was initially and long-run equilibrium, and on anticipated increase in aggregate demand will tend to cause
Lower resource prices and lower real interest rates
If an unanticipated decrease in aggregate demand results in and output below the economy's long-run capacity, long-run equilibrium will eventually be restored by
An increase in aggregate demand
If output is less than full employment in the Keynesian model, what is needed to restore full employment?
A decrease in aggregate demand
If the countries we trade with go into severe recessions and, as a result, they are real income levels declined, in the short run we can expect
An increase in resource prices
If the economy is operating at an output level beyond its full employment capacity, which of the following would most likely direct the economy back to long-run equilibrium?
Additional bonds issued by the US treasury
If the federal government runs a budget deficit in order to finance an increase in spending, where do the funds to finance a spending come from?
A debt of template $7 trillion and the deficit of the $700 billion
If the government owes $10 trillion and then borrows $700 billion more this year this leads to
The level of total spending in the economy is equal to current output
In the Keynesian view, equilibrium takes place when
National output to increase if the economy is initially operating far below full employment
In the basic Keynesian model, and increased and spending will cause
National output to increase but have no effect on prices
In the basic Keynesian model, if the economy is currently operating far below full employment, and increase in aggregate demand will cause
National output to be unaffected the prices to increase
In the classical model, and increase in aggregate demand will cause
Inappropriate because it would depress economic activity and lead to further increases and unemployment
In the midst of great depression and 1932, Congress and the Hoover administration increased tax rates substantially. According to the Keynesian view, this tax increase was
US imports will increase, exports will decrease, and aggregare demand will shift to the left
In the short run, if the foreign-exchange value of the dollar increases which of the following will occur
Lower real resource prices and interest rates will act as a stabilizing force and direct economy back to it full employment potential
It's an unanticipated reduction in aggregate demand throws a market economy into a recession
Businesses would accumulate inventories and output would fall
Keynesian Analysis suggests that if plan spending (aggregate demand) or $700 billion but GDP was $800 billion
An increase in inventories and a reduction in output
Keynesian analysis indicates that an unexpected the Klein and aggregate demand will lead to
A budget deficit is needed if the economy is operating at less than full employment
Keynesian countercyclical budget policy suggest that
Insufficient aggregate demand and the failure of market forces to direct the economy back to full employment
Keynesian economist believed that the prolonged unemployment of the 1930s was the result of
By the time the impact of the policies felt, the problem may have been corrected by market forces
Long lags make discretionary policy less effective because
Believe that market forces could be counted on to full employment quickly when unemployment was temporarily high
Prior to the 1930s, most economist
Lower wages that would increase the quantity of labor demanded and reduce unemployment
Prior to the great depression, most economists believe that a recessionary downturn would be reversed by
Level of aggregate demand required to achieve full employment of resources
Rather than seeking to balance the budget, the Keynesian economist argue that the government tax and spending policies should be determined by the
Depressed economic conditions and prolonged high rates of unemployment
The 1930s were period of
The federal budget should be used to maintain aggregate demand at a level consistent with full employment
The Keynesian Analysis of fiscal policy implies that
Implies that an increase in aggregate demand will often lead to an increase in GDP
The basic Keynesian model
Changes in investment, government, or consumption spending can trigger much larger changes in output
The expenditure multiplier indicates that
Increases government spending and/or reduces taxes
The government is pursuing and expansionary fiscal policy if it
Prolonged periods of unemployment would be present when demand is deficient
The great depression provided support for Keynes' view that
Input prices are fixed in the short run
The standard AD/AS model of the economy assumes that
Rising housing prices increased aggregate demand shifting AD rightward
What impact did the change in housing prices during 2002 to 2005 have within the framework of the AD/AS model?
The government should cut taxes and/or increase expenditures in order to stimulate aggregate demand
When an economy is operating below its potential capacity, Keynesian economist argue that
Keynesian views would recommend expansionary fiscal policy
When the economy is in recession an economist with
Government expenditures exceed to government revenues
When the federal government is running a budget deficit
The actual rate of unemployment will be less than the natural rate
When the output of an economy exceeds the economies full employment capacity,
Bid resources away from other activities and drive prices up board, reducing the size of the multiplier
When there are few unemployed resources, additional spending will tend to
An unanticipated increase in aggregate demand
Which is most likely to cause a temporary spurt in the growth of GDP that cannot be maintained in the long run?
Higher resource prices and cost will reduce short run aggregate supply until output falls to the economy's long-run capacity
Which of the following adjustments will most likely occur when output exceeds that economies long run capacity?
Deficits are planned during economic recessions, and surpluses are utilized to restrain inflationary booms
Which of the following best expresses the central idea of countercyclical fiscal policy
Congress passes a bill authorizing $100 billion in additional spending when it receives news of a deepening recession
Which of the following best illustrates the use of discretionary countercyclical fiscal policy?
A decrease in the price level
Which of the following events would not shift the aggregate demand?
Both political and economic factors make it unlikely that changes and fiscal policy will be timed correctly
Which of the following is a major deficiency of fiscal policy of a stabilization tool?
Fluctuations in aggregate demand are an important potential source of business and stability
Which of the following is a major inside of the Keynesian model?
Changes in aggregate demand
Which of the following is a primary source of changes in output within the framework of Keynesian analysis?
It is difficult to properly time discretionary changes in fiscal policy
Which of the following is a problem with discretionary fiscal policy as an economic stabilization tool?
When widespread unemployment is present, increases in aggregate demand will exert a larger impact on real output then when the economy is operating at or near full employment
Which of the following is an important insight of Keynesian analysis
And increase in real GDP
Which of the following is most likely to accompany an unanticipated increase in short run aggregate supply?
An unanticipated increase in aggregate demand
Which of the following is most likely to result in a temporary spurs in the growth of real output that cannot be maintained in the long run?
He believed that the primary problem of market economies is that the private sector often attempt to spend too much
Which of the following statements about John Maynard Keynes is not correct?
It is upward sloping because input prices are soon to be fixed in the short run
Which of the following statements about the short run aggregate supply curve in the standard AD/AS model is correct?
The basic Keynesian model gives us insight into how spending changes will affect the economy if there are lots of unemployed resources
Which of the following statements is correct?
When the economy is in a recession, falling resource prices and declining interest rates will direct the economy back to full employment
Which of the following statements is most consistent with the view that the economy has a self corrective mechanism?
A decrease in the real interest rate
Which of the following will cause an increase in aggregate demand within the AS/AD model?
An increase in the real interest rate
Which of the following will most likely occur as a result of them on dissipated increase in aggregate demand that pushes output beyond long run capacity?
A short run increase in US employment and output
Which of the following will most likely occur in the United States as a result of an unexpected rapid growth in real income in Japan and Europe?
Lower real incomes of the country's foreign trade partners
Which of the following will reduce aggregate demand?
Businesses will not produce goods and services if they do not think people will buy them
Which of the following would a Keynesian economist be most likely to stress?
Growth in real GDP
Which of the following would decrease the size of the federal budget deficit?
A decrease in government spending would be an example of contradictionary fiscal policy
Which statement is correct?
Attacks change alters disposable income and consumption spending
Why does attacks change affect aggregate demand?
When consumption increases by $1, saving increases by $5
Within the Keynesian model, it's the marginal propensity to consume is 0.8, which of the following is true?
Magnify small changes and spending into much larger changes and output and employment
Within the Keynesian model, the multiplier effect tends to
Be timed correctly
If a fiscal policy change is going to exert a stabilizing impact on the economy, it must
Lower prices
The long then effects of finding additional natural resources would include
The federal budget
The primary tool of the school policy is
The unemployment rate will rise above its natural rate
When an economy is in a recession,
Changes and output rather than changes in prices direct economy to equilibrium
Within the framework of the Keynesian model,
