Quiz 4

Graphically, cost-push inflation is shown as a

leftward shift of the AS curve.

In Year 1, the actual budget deficit was $150 billion and the cyclically adjusted deficit was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically adjusted deficit was $125 billion. It can be concluded that from Year 1 to Year 2,

real GDP increased.

An increase in investment and government spending can be expected to shift the

aggregate expenditures curve upward and the aggregate demand curve rightward.

Other things equal, if the U.S. dollar were to depreciate, the

aggregate supply curve would shift to the left.

In the diagram, it is assumed that investment, net exports, and government purchases

are independent of the level of GDP.

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

rightward by $50 billion at each price level.

The cyclically adjusted budget refers to

the size of the federal government's budgetary surplus or deficit when the economy is operating at full employment.

When the dollar appreciates relative to foreign currencies, it means that

the value of foreign currencies decreased relative to our dollar.

Wage contracts, efficiency wages, and the minimum wage are explanations for why

wages tend to be inflexible downward.

Price Level C Ig G X M Real GDP 128 $18 $2 $3 $1 $5 125 20 4 3 2 4 122 22 6 3 3 3 119 24 8 3 4 2 116 26 10 3 5 1 In the accompanying table for a particular country, C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. If this nation's equilibrium price level is 125, its net exports will be

$2 billion.

Government Spending Tax Revenues GDP Year 1 $450 $425 $2,000 Year 2 500 450 3,000 Year 3 600 500 4,000 Year 4 640 620 5,000 Year 5 680 580 4,800 Year 6 600 620 5,000 The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is

$275 billion.

In 2015, about ________ percent of the U.S. public debt was held by the U.S. government and Federal Reserve.

34

Approximately what percentage of the U.S. public debt is held by foreign individuals and institutions (2015)?

34 percent

In the diagram, the economy's relevant aggregate demand and immediate-short-run aggregate supply curves, respectively, are lines

4 and 3.

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneficiaries was ________; by 2040 it is projected to be ________.

5:1; 2:1

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Other things equal, inflation is absent in

A and C.

Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. Growth, full-employment, and price stability are depicted by

C.

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.

aggregate demand curve would shift to the right.

The Great Recession of 2007-09 and the consequent policy response made the

cyclically adjusted deficit grow during that period.

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely

complement private investment.

Refer to the graph. A shift from AS1 to AS2 would be consistent with what economic event in U.S. history?

cost-push inflation in the mid-1970s

The intent of contractionary fiscal policy is to

decrease aggregate demand.

The immediate-short-run aggregate supply curve is

horizontal.

The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries will

increase U.S. imports and decrease U.S. exports.

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $400 billion, (2) investment = $40 billion, (3) government purchases = $90 billion, and (4) net export = $25 billion. If the full-employment level of GDP for this economy is $600 billion, then what combination of actions would be most consistent with closing the GDP gap here?

increase government spending and decrease taxes

An increase in investment spending caused by higher expected rates of return will

shift the aggregate expenditures curve upward and the aggregate demand curve to the right.

Fiscal policy is enacted through changes in

taxation and government spending.

If the government wishes to increase the level of real GDP, it might reduce

taxes.

To say that "the U.S. public debt is mostly held internally" is to say that

the bulk of the public debt is owned by U.S. citizens and institutions.

A major concern with the Social Security trust fund is that

the fund will be exhausted in a couple of decades.