MT 4/5 Econ 2105

The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.

by more than

The national debt is the amount

by which government outlays exceed tax revenue in a given year.

To evaluate relative changes in the net public debt, we must

compare it to the nation's real GDP

If the economy's full-employment output is $6 trillion, actual output is $3.5 trillion, and the budget deficit is $20 billion, the deficit in this case is known as a

cyclical deficit.

From an initial long-run equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate supply, then Congress and the president would most likely

decrease taxes.

When a nation starts importing a good or service, domestic employment in that industry

decreases

When government outlays exceed tax revenues, the situation is called a budget

deficit

Since 2000, the U.S. government has generally had a government budget ________ and so the national debt has ________.

deficit; increased

Time lags that often erode effectiveness of monetary and fiscal policy measures represent

delays in the response of the economy to stabilization policy.

When the United States exports goods and services to France, there is an increase in the

demand for dollars.

If the dollar's value changes from 120 yen per dollar to 110 yen per dollar, the dollar has

depreciated

Today, one U.S. dollar exchanges for 1.10 euros. The next morning the same dollar exchanges for 1.07 euros. We can conclude that the dollar has ________ and the euro has ________.

depreciated; appreciated

Figure 7-1 shows the U.S. demand and supply for leather footwear.Refer to Figure 7-1. Under autarky, the equilibrium price is

$30

According to the above table, the country will import the good if the world price is less than ________ and will export the good if the world price is more than ________.

$6; $6

In 2008, the Treasury and Federal Reserve took several actions in response to the deepening financial crisis. One action was the Treasury's move to have the federal government take control of

Fannie Mae and Freddie Mac.

Which of the following statements is false?

If Japan imposes a subsidy on car exports to the United States, the price of cars in the United States is likely to increase.

The current account does not include which of the following?

U.S. holdings of foreign assets

Who gains from international trade?

both the importing and the exporting nations

When unemployment is below its natural rate, the inflation rate will eventually

increase

If the United States decreases the tariff on imported tuna steaks, this will

increase the number of tuna steaks imported in the United States and reduce the production of tuna steaks in the United States.

Table 2-4 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. Refer to Table 2-4. What is Jack's opportunity cost of cultivating a garden?

one and a half lawns mowed

Refer to Table 2-4. What is George's opportunity cost of mowing a lawn?

one-half of a garden cultivated

Which of the following is true? i.Comparative advantage drives international trade. ii.Compared to a no-trade situation, imports make domestic producers better off. iii.Tariffs lower the domestic price of imported goods.

only i.

Of the three primary tools the Federal Reserve uses to conduct monetary policy, the tool used most often is

open market operations.

If the income from investments by Americans abroad exceeds the income from investments by non-Americans in the United States, then net income from abroad is

positive

The quantity of U.S. dollars supplied in the foreign exchange market is

positively related to the exchange rate.

Suppose the Fed pursues a policy that leads to higher interest rates in the United States. How will this policy affect real GDP in the short run if the United States is an open economy? This policy

reduces investment spending, consumption spending and net exports, all of which reduce GDP.

Dumping refers to

selling a product for a price below its cost of production.

If the economy is in a recession, the full-employment deficit is ________ the actual deficit.

smaller than

Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic

stabilizers.

When we keep part of our wealth in a bank checking account, we are using money as a

store of value.

If the federal government has a budget surplus, then it is definitely the case that

tax revenues exceeds government outlays.

The structural deficit is the deficit

that would occur at full employment

The structural deficit is the deficit

that would occur at full employment.

What two measures of macroeconomic activity are often referred to as the "twin deficits"?

the budget deficit and the current account deficit

When the United States sends money to Indonesia to help tsunami survivors, in what account is this transaction recorded?

the current account

A flexible exchange rate between two countries is determined by

the demand and supply of both countries' currencies

When the market value of the dollar rises relative to other currencies around the world, we say that

the dollar has appreciated.

For the federal deficit to be lowered

the federal government's expenditures must be lower than its tax revenue.

If the current account is in deficit, we know that

the financial account is in surplus.

The use of fiscal policy to stabilize the economy is limited because

the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way.

The recognition lag of stabilization policy represents

the time that it takes for policy makers to recognize a change in the economy

Which of the following creates a demand for U.S. dollars?

Toyota, a Japanese firm, purchasing land in Texas

The United States is called a debtor nation because

it has a large current account deficit and is simultaneously funded by foreign investment.

Which of the following would not be considered an automatic stabilizer?

legislation increasing funding for job retraining passed during a recession

When tax revenues ________ outlays is positive, then the government has a budget ________.

minus; surplus

The ratio of the change in the equilibrium level of output to a change in some autonomous variable is the

multiplier

The structural deficit or surplus is the

government budget deficit or surplus that would occur if the economy were at full employment.

An increase in government purchases will increase aggregate demand because

government expenditures are a component of aggregate demand.

If the federal government ________ during the financial crisis of 2008-2009, the fall in overall stock prices would likely have been larger.

had not bailed out the large financial institutions

Which of the following is an objective of fiscal policy?

high rates of economic growth

Refer to the information provided in Table 18.4 below to answer the questions that follow.Table 18.4 GermanyChile BeerWineBeerWine (cases)(cases)(cases)(cases) 75 0 30 0 60 15 24 12 45 30 18 24 30 45 12 36 15 60 6 48 0 75 0 60

1 case of beer

Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts.Refer to Figure 2-8. What is the opportunity cost of producing 1 ton of coconuts in Guatemala?

1/2 of a ton of pineapples

Table 2-7 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas.Refer to Table 2-7. What is Minnie's opportunity cost of making a hat?

1/4 of an umbrella

Refer to Figure 18-1. Italians cut back on smoking and cut their demand for American cigarettes in half. Assuming all else remains constant, this would be represented as a movement from

B to A.

Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered, as is what happened in the United States in 1849. If the economy is at full employment, what should this discovery do?

It should raise the money supply and cause inflation.

Which of the following would be classified as fiscal policy?

The federal government cuts taxes to stimulate the economy.

Historically, the largest U.S. federal budget deficits as a percentage of GDP in the 20th century occurred during

World War I and World War II.

National debt decreases in a given year when a country has

a budget surplus.

In 2009, Congress passed tax laws to reduce income tax rates for some taxpayers. This action is called

a discretionary fiscal policy

One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost than firms in other nations in the production of such aircraft.

a lower

Which of the following is not included in the balance of the financial account of the United States?

a purchase of German legal services by Chase Manhattan Bank

If the economy is in equilibrium with real GDP less than potential GDP, there is ________ gap, and a fiscal policy that ________ is appropriate.

a recessionary; increases aggregate demand

Refer to Table 2-1. Assume Dina's Diner only produces sliders and hot wings. A combination of 40 sliders and 50 hot wings would appear

along Dina's production possibilities frontier.

The time it takes the Fed or Congress to change economic policy is

an implementation lag.

In an expansion, federal tax revenues increase proportionally more than real GDP without the need for any government policy. This increase is an example of

automatic fiscal policy

The record of a country's transactions in goods, services, and assets with the rest of the world is its

balance of payments

Refer to Table 2-1. Assume Dina's Diner only produces sliders and hot wings. A combination of 40 sliders and 25 hot wings would appear

inside Dina's production possibilities frontier

The government expenditure multiplier and the tax multiplier are

different in size and the government expenditure multiplier is larger.

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________ because ________.

does not change; both currency and checkable deposits are included in M1

Autarky is a situation in which a country

does not trade with other countries

The currency adopted by most countries in Western Europe is referred to as the

euro

Exchange rates that are determined by the unregulated forces of supply and demand are

floating exchange rates.

Other things remaining the same, as U.S. imports increase, the quantity of

foreign currency demanded increases.

The multiplier effect refers to the series of

induced increases in consumption spending that result from an initial increase in autonomous expenditures