The short-run aggregate supply curve is positively sloped because:

higher prices lead to higher profit and higher output.

Not final goods, so theyre not calculated in agg price level

Increase government spending by $20 billion.

Refer to Figure 4-1. Which of the following may lead the shift indicated?

The existing stock of physical capital is relatively small.

Gov policy can close a recessionary gap w/o a higher rate of inflation if which is true?

The gap was caused by a demand shock and taxes are lowered.

Fiscal policy refers to:

the manipulation of government spending and taxations.

The modern tools of macroeconomic policy are:

fiscal policy and monetary policy.

Which of the following is an automatic stabilizer?

An increase in UE insurance payments during a recession.

The marginal propensity to consume is:

(Δ in consumer spending)/(Δ in aggregate disposable income)

Upward shift in the agg. consumption function for the current period would be likely caused by

An expected increase in income in the next period.

Long Run Aggregate Supply would not

Always be equal to current GDP in the short run

Which of the following would lead to a decrease in planned investment spending?

Rate of return on project< cost of necessary borrowed funds

Which of the following statements best describes what will happen as a result of AD1 to AD2?

Short run agg supply would to shift left in the long run

Which of the following would be considered contractionary fiscal policy?

A decrease in spending on Medicare or Medicaid.

studbud

Section 4 Review

25 termsStudBud Administration110 plays

#econ #section4

Flashcards25 cardsFPractice quizPHost liveL

Questions 25

Answers

1
An example of fiscal policy to decrease aggregate demand would be:
Decreasing the tax rate.
Increasing the tax rate.
Increasing the amount of government transfers.
Increasing the quantity of money in circulation.
2
The short-run aggregate supply curve is positively sloped because:
higher prices lead to higher productivity and output
profit is lower when prices increase, so output decreases.
workers are willing to work for lower wages to avoid layoffs
higher prices lead to higher profit and higher output.
3
See Pic
The price of commodities change very little.
Commodities don't represent a cost to most suppliers
There is no explanation for this difference.
Not final goods, so theyre not calculated in agg price level
4
See Pic
25
Multiplier can't be determined based on information given.
4
.75
5
See Pic
Decrease government spending by $100 billion.
Increase government spending by $20 billion.
Increase government spending by $25 billion.
Increase government spending by $800 billion.
6
Refer to Figure 4-1. Which of the following may lead the shift indicated?
If firms become less optimistic.
Government reduces spending.
The existing stock of physical capital is relatively small.
A central bank lowers the money supply.
7
Gov policy can close a recessionary gap w/o a higher rate of inflation if which is true?
The gap was caused by a supply shock and taxes are lowered.
The gap was caused by a demand shock and taxes are lowered.
Gap was caused by a supply shock and gov spending increases
The gap was caused by a demand shock and taxes are raised.
8
See pic
A recessionary gap.
Short run equilibrium.
An output gap.
An inflationary gap.
9
See Pic
Decrease taxes by $25 billion.
Decrease government transfers by $25 billion.
Increase taxes by $100 billion.
Decrease taxes by $100 billion.
10
Fiscal policy refers to:
the manipulation of interest rates.
the manipulation of government spending and taxations.
the manipulation of the quantity of money.
manipulation of interest rates and of government spending.
11
See Pic
The existence of imperfectly competitive markets.
The existence of perfectly competitive markets.
Sticky wages
Changes in the productivity of firms.
12
The modern tools of macroeconomic policy are:
fiscal policy and monetary policy.
fiscal policy and trade policy.
tax policy and antitrust policy.
monetary policy and exchange rate policy.
13
See Pic
$200 Million
$100 Million
$400 Million
$500 Million
14
Which of the following is an automatic stabilizer?
The economic stimulus package of 2008.
An increase in UE insurance payments during a recession.
Government funds the building of schools during a recession.
An increase in military spending during a war.
15
See Pic
D
B
A
C
16
The marginal propensity to consume is:
equal to 1.
increasing if the marginal propensity to save is increasing.
(Δ in consumer spending)/(Δ in aggregate disposable income)
(Δ in consumer spending)-(Δ in aggregate disposable income)
17
An economy is in shortrun equilibrium. Which of the following events would lead to stagflation?
Stagflation cannot occur when an economy is in equilibrium.
A positive supply shock
A Negative supply shock.
A positive demand shock.
18
(see pic) In the short run, a decrease in investment is illustrated by:
Panel (B).
Panel (A).
Panel (D).
Panels (B) and (D).
19
See Pic
C
B
D
A
20
Unplanned inventory investment is most likely associated with what point in the business cycle?
Downturn.
Expansion.
None of the answers are correct, all investment is planned.
Booms.
21
Upward shift in the agg. consumption function for the current period would be likely caused by
An increase in the MPS.
An expected increase in income in the next period.
An increase in the MPC.
A decrease in the MPS.
22
Long Run Aggregate Supply would not
Increase if the quality of resources improved.
Be the agg output supplied when prices are fully flexible.
Be potential output.
Always be equal to current GDP in the short run
23
Which of the following would lead to a decrease in planned investment spending?
A lower interest rate.
All of the options would lead to a decrease in planned I
Rate of return on project< cost of necessary borrowed funds
Firms is nearing production capacity
24
Which of the following statements best describes what will happen as a result of AD₁ to AD₂?
Short run agg supply curve will shift right in the long-run
The economy would be in a permanent recessionary gap.
Macroeconomy will stabilize at new long run equilibrium, E2
Short run agg supply would to shift left in the long run
25
Which of the following would be considered contractionary fiscal policy?
An increase in Social Security Spending.
An increase in military spending.
A decrease in income taxes.
A decrease in spending on Medicare or Medicaid.

Section 4 Review Flashcards | StudBud