Which of the following would be considered contractionary fiscal policy?

A decrease in spending on Medicare or Medicaid.

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

Rate of return on project< cost of necessary borrowed funds

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.

The modern tools of macroeconomic policy are:

fiscal policy and monetary policy.

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

higher prices lead to higher profit and higher output.

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

The existing stock of physical capital is relatively small.

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

Fiscal policy refers to:

the manipulation of government spending and taxations.

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.

Increase government spending by $20 billion.

Which of the following is an automatic stabilizer?

An increase in UE insurance payments during a recession.

Long Run Aggregate Supply would not

Always be equal to current GDP in the short run

The marginal propensity to consume is:

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

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

studbud

Section 4 Review

25 termsStudBud Administration110 plays

#econ #section4

Flashcards25 cardsFPractice quizPHost liveL

Questions 25

Answers

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

Section 4 Review Flashcards | StudBud