Assume autonomous net taxes fall by $300, the MPC=2/3. Net exports, planned investment, taxes, and government purchases are atunomous and remain fixed. As a result, consumption will initially;a. remain unchanged;b. rise by $300;c. Fall by $300;d. rise by $200;e. fall by $200;Fiscal policy focuses on manipulating;a. Aggregate demand to smooth out business fluctuations;b. Aggregate supply to smooth out business fluctuations;c. Both aggregate supply and aggregate demand to smooth out business fluctuations;d. Aggregate demand to stimulate the economy and aggregate supply to contract it;e. Short-run aggregate supply to stimulate the economy and aggregate demand to contract it;Assume autonomous net taxes rise by $ 500, the marginal propensity to consume=3/4. Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed. Disposable income will initially;a. Remain unchanged;b. Fall by $500;c. Fall by $375;d. Fall by $2000;e. Rise by $500;In which of the following ways does government affect the consumption component of planned aggregate expenditures?;a. Through net taxes, which change disposable income;b. By purchasing goods and services, which increase consumption;c. By using subsidies to encourage firms to invest;d. By using net taxes to encourage firms to invest;e. By producing public goods;If autonomous net taxes increase by $200 billion and the MPC equals.75, equilibrium income will;a. Decrease by $200 billion;b. Decrease by $150 billion;c. Decrease by $600 billion;d. Decrease by $267 billion;e. Decrease, but it is impossible to calculate the exact amount of the change;Discretionary fiscal policy works by shifting the aggregate demand curve;a. True b. False;A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve.;a. True b. False;Discretionary fiscal policy works by shifting the short-run aggregate supply curve.;a. True b. False;If government equilibrium purchases and autonomous net taxes increase by the same amount, the equilibrium level of real GDP will be unchanged;a. True b. False;Suppose the government reduces its budget deficit at the same time that energy prices rise sharply. Which of the following will happen?;a. The price level will rise, since higher energy prices increase the cost of production.;b. Real GDP will fall, since both events will tend to cause an economy contraction.;c. The price level will fall, because the aggregate demand curve has shifted leftward;d. Real GDP will rise, with less government spending, there are more opportunities for the private sector.;e. Both the price level and real GDP will fall;If the marginal propensity to consume is.8 and the proportional income tax is.25, by how much would the equilibrium level of real GDP demanded increase if government purchases rose by $50 billion?;a. $50 billion;b. $100 billion;c. $500 billion;d. $125 billion;e. $275 billion;When we relax the assumption that net exports do not change with income, the aggregate expenditure function;a. Becomes steeper because net exports decrease as real domestic income increases;b. Becomes steeper because net exports increase as real domestic income increases;c. Becomes flatter because net exports decrease as real domestic income increases;d. Becomes flatter because net exports increase as real domestic income increases;e. Remains unchanged because it is not affected by changes in net exports;If the government wants to increase equilibrium income $150 billion but does not want to change the size of the deficit, it should;a. Increase G and decrease T by $150 billion;b. Increase G and T by $150 billion;c. Decrease G and T by $150 billion;d. Decrease C and increase T by $150 billion;e. We cannot answer this question without knowing the MPC;If the MPC equals.75 and the proportional income tax rate is.2, the spending multiplier equals;a. 3;b. 2.5;c. 16/13;d. 1;e. 4;With proportional income tax;a. Each individual pays whatever he/she is able to pay;b. Each individual pays the same amount of money to the government;c. Each individual pays the same percent of income in the form of taxes;d. The spending multiplier is unaffected by the tax rate;e. The spending multiplier increases as the tax rate increases;A $100 increase in autonomous government purchases has the same effect on the equilibrium level of real GDP as $100 increase in autonomous investment spending would.;a. True b. False;With proportional income tax;a. The tax multiplier equals (MPC)(1-MPC);b. The tax multiplier equals ?MPC/(1-MPC);c. The spending multiplier equals (MPC)/(1-MPC);d. The spending multiplier equals 1/[1-MPC(1-t)];e. The spending multiplier equals 1/[1-(MPC)t];If the MPC=.8 and both government purchases and autonomous net taxes fall by $100 billion, by how much does the equilibrium level of real GDP demanded change (assuming neither income taxes nor net exports exist)?;a. -$100 billion;b. +$100 billion;c. -$500 billion;d. +$500 billion;e. +$200 billion;In which of the following situations will the combination of the marginal propensity to consume and the proportional income tax rate (t) result in the larges multiplier?;a. Both the MPC and t are large;b. Both the MPC and t are small;c. The MPC is large, t is small;d. The MPC is small, t is large;e. The MPC equals t;Suppose that government purchases increase by $200 and at the same time autonomous net taxes are increased by $200. If there are neither income taxes nor net exports, the change in equilibrium real GDP demanded will;a. Depend on the value of the MPC;b. Be a $200 decrease;c. Be a $200 increase;d. Be equal to zero, since higher taxes exactly offset higher government spending;e. Be an increase by some amount greater than $200;Approximately what percentage of the U.S. federal budget was used for interest payments (on the national debt) in 2004?;a. 7 percent;b. 10 percent;c. 14 percent;d. 25 percent;e. 40 percent;The Council of Economic Advisors was created by;a. The same legislation which created the Federal Reserve Board;b. President John F. Kennedy;c. The Employment Act of 1946;d. The Office of Management and Budget;e. Congress in 1921;A deficit resulting from the use of discretionary fiscal policy;a. Increases interest rate;b. Decreases interest rates;c. Increases interest rates if the effect of the decrease in the demand for money is greater than the effect of the increase in the supply of government securities;d. Increases interest rates if the effect of the decrease in the demand for money is less than the effect of the increase in the supply of government securities;e. Increases interest rates if the effect of the increase in the demand for money is greater than the effect of the decrease in the supply of government securities;Some economists have theorized that increases in the deficit have little or no expansionary effect because families reduce their spending by an equivalent amount in order to protect the economic security of their offspring;a. True b. False;Crowding occurs because lower interest rates discourage saving and make it harder to borrow;a. True b. false;What were the chief links between the U.S. federal budget deficit and the U.S. trade deficit during the 1980s?;a. High U.S. interest rates led to a rise in the relative value of the dollar;b. High U.S. interest rates led to a decrease in the relative value of the dollar;c. U.S. interest rates fell relative to foreign rates and thus the dollar appreciated;d. The U.S. price level declined relative to that of foreign countries, causing U.S. interest rates to fall;e. The recessions of 1980 and 1981-1982 were the key links, recession widened the budget deficit and this caused the U.S. price level to fall, enabling foreigners to invest in U.S. assets;A continuing resolution provides authorization for continuing agency operation even after its budge has expired.;a. True b. false;The federal government spends more for a national defense than for anything else;a. True b. false;One explanation for persistent federal budget deficits is that officials are not required to;a. Honor the constitution;b. Balance the budget;c. Raise taxes;d. Run for reelection;e. None of the answers are correct;If the government increased defense spending by $1 million and laid off enough justice department employees to decrease the department of justice budget by $1 million, we should expect the net effect to be;a. An increase in the budget deficit and in transfer payments;b. An increase in the budget deficit and in net taxes;c. An increase in the budget deficit and in government spending;d. No change in the budget deficit because there is no net change in government spending;e. No change in the budget deficit because neither defense spending nor the department of justice is included in government spending;If you returned a $5 Federal Reserve note to Fed, you could receive;a. $5 in silver;b. $5 in gold;c. 5 one-dollar bills;d. 10 one-dollar bills;e. A small gold bar;If the reserve requirement is constant, it is impossible for a bank?s excess reserves to fall if its total reserves have not fallen;a. True b. False;If the required reserve ratio is 20 percent and a bank has $100,000 in checkable deposits, then its;a. Required reserves are $500,000;b. Required reserves are $20000;c. Assets are $500000;d. Liabilities are $500,000;e. Liabilities plus its net worth are $500,000;M1, the money supply narrowly defined, consists of coins, paper currency, checkable deposits, travelers checks, and certificates of deposits (CDs);a. True b. False;In financial markets, asymmetric information exists when;a. One party to a transaction has more knowledge of the relevant details than the other does;b. Both parties to a transaction has less knowledge of relevant details than the Fed does;c. Lenders know more about the borrowers than the borrowers know about themselves;d. All parties to a transaction have exactly the same information;e. All the information which the parties have is inaccurate;Suppose the required reserve ratio is.1 and Linda deposits $4,000 in cash at the College State Bank. If the bank held no excess reserves before Linda?s deposit and now increases its reserves by $500, which of the following is true?;a. The bank must have lent out an additional $4000;b. The $500 are required reserves;c. The bank has excess reserves of $100;d. Both the bank?s assets and its liabilities rise by $500;e. The bank has $500 in excess reserves;Most of the assets of the Fed are held in the form of;a. Gold;b. U.S. government securities;c. Loans to member banks;d. U.S. Treasury deposits;e. Checkable deposits;Transactions using debit cards and other electronic transfers now exceed payments by check;a. True b. False;Which of the following is the largest component of assets of the Federal Reserve?;a. U.S. Treasury deposits;b. U.S. government deposits;c. Foreign exchange;d. Time deposits;e. Checkable deposits;Banks are permitted to lend all of their excess reserves;a. True b. False;Which of the following would most likely lower the velocity of money?;a. Commercial innovations that facilitate exchange;b. Lower inflation rate;c. A decline in the effectiveness of money as a store of wealth;d. A higher inflation rate;e. Paying workers once a week instead of once a month;For interest rates to remain stable during economic contractions, monetary authorities should;a. Reduce the demand for money;b. Increase the demand for money;c. Match the rate of growth in the money supply to the rate of growth in nominal GDP;d. Reduce the rate of growth in the money supply below the rate of growth in the demand for money;e. Slow the growth of the money supply, or even let the money supply shrink;If the Fed buys bonds, then the money supply;a. Increases, the interest rate falls, and the quantity of money demanded increases;b. Falls, the interest rate falls, and the quantity of money demanded increases;c. Increases, the interest rate increases, and the quantity of money demanded increases;d. Falls, the interest rate increases, and the quantity of money demanded falls;e. Falls, the interest rate falls, and the quantity of money demanded falls;To eliminate a contractionary gap, the Fed can ??.. the money supply, which would ??..;a. Increase, increase the interest rate and investment;b. Increase, decrease the interest rate and increase investment;c. Decrease, increase the interest rate and investment;d. Decrease, decrease the interest rate and investment;e. Decrease, increase interest rate and decrease investment;The equation of exchange states that;a. Money in circulation x prices = velocity x income;b. Money in circulation x income = velocity x prices;c. Real GDP =money in circulation x velocity;d. Nominal GDP = money in circulation x velocity;e. E. real GDP = prices x money in circulation x velocity;The demand for money is based primarily on money?s role as a(n);a. Store of wealth;b. Medium of exchange;c. Standard of value;d. Interest-bearing asset;e. Non-interest bearing asset;Which of the following is not assumed to be constant along the money demanded curve?;a. The price level;b. The interest rate;c. Real GDP;d. Nominal GDP;e. Individual?s tastes and preferences;Which monetary policy would be appropriate to close a contractionary gap?;a. Tax cut;b. A decrease in government purchases;c. An increase in reserve requirements;d. The Fed?s purchase of U.S. government securities;e. The Fed?s raising the discount rate;What is the effect of an expansionary monetary policy on the demand for investment curve?;a. It causes the curve to shift left;b. It causes the curve to shift right;c. It causes a downward movement along the curve;d. It causes an upward movement along the curve;e. It has no effect on the quantity of investment demanded;Economists of the rational expectations school;a. Have no confidence in the ability of workers and firms to observe and react to economic events;b. Believe workers and firms behave the same regardless of what the Fed does;c. Have great faith in the ability of monetary policy makers to maintain a full employment economy with stable prices;d. Believe that effective monetary policy can shift the potential level of output to the right;e. Believe workers and firms make decisions based on what they think monetary policy will be in the future;In the 1992 presidential campaign, Clinton?s biggest political liabilities were the sluggish recovery and ballooning federal deficits;a. True b. False;Suppose the economy had been operating along a given short-run Philips curve for several years and then experienced a year of stagflation. The year of stagflation would;a. Be represented as a move upward along the short-run Philips curve;b. Be represented as a move downward along the short-run Philips curve;c. Can be represented as a point above the short-run Philips curve;d. Be represented as a point below the short-run Philips curve;e. Correspond to the origin;The rational expectations school advocates the passive rule of a fixed-growth-rate monetary policy because;a. We don?t have enough information to pursue an active policy;b. The economy is not in bad enough shape to require active intervention;c. Then the Federal Reserve Board would be superfluous and we could eliminate a large bureaucracy;d. People render active policy ineffective by figuring out what it?s going to be and taking actions to offset it;e. They prefer to put their major emphasis on an active fiscal policy;The selection of a new policy takes place during a period of time known as the;a. Activity lag;b. Decision-making lag;c. Effectiveness lag;d. Implementation lag;e. Recognition lag;The wage rate considered acceptable to workers engaged in collective bargaining will be determined in part by what monetary policy workers expect in the near future;a. True b. False;Given the expected price level, policies for reaching potential GDP will work best if the money supply is;a. Large, so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment;b. Large enough that prices at potential GDP are above expectations and firms can afford to hire workers;c. Small, so that prices at potential GDP are below expectations and people can afford to buy enough goods to support the natural level of employment;d. Small, so that prices at potential GDP are above expectation and firms can afford to hire the workers;e. Exactly the size that makes prices equal to the prices people expected to prevail;If the natural unemployment rate cannot easily be estimated, ??? policy making becomes more difficult;a. Active;b. Passive;c. Monetarist;d. Classical;e. Rational expectations;Those who favor a passive approach to policy often argue that changes in prices and wages will shift the short-run aggregate supply curve;a. Before active policy shifts the aggregate demand curve;b. Only after active policy shifts the aggregate demand curve;c. More than active policy shifts the aggregate demand curve;d. Less than active policy shifts the aggregate demand curve;e. In the direction opposite to the shift in the aggregate demand curve caused by active policy.;Suppose that in 2004 the Fed announced a policy of rapid growth in the money supply, but then put the brakes on money expansion without any announcement. If in 2005, Fed officials announce again that an expansion is planned, the most likely result is that;a. People will believe the announcement since the conditions that created a need for the expansion are probably still in effect;b. People will believe the announcement since they will believe that having failed to implement the expansion previously, the Fed still plans to do so;c. People will not believe the announcement since they will believe that the conditions that created a need for the expansion must have changed in the meantime;d. People will not believe the announcement since they will believe that having failed to implement the expansion previously, the Fed will probably fail again;e. There will be more uncertainty about the Fed following through on the policies it announces;An effective import quota;a. Lowers the price of imports;b. Lowers the price of domestic goods competing with imports;c. Increases the variety of goods available to the consumer;d. Increases tax revenues;e. Lowers the quantity demanded of the imported good;If an established domestic industry is in jeopardy of being displaced by lower-priced imports, there could be a rationale for;a. Permanent import restrictions to prevent the decline of the domestic industry;b. Temporary import restrictions to allow the orderly adjustment of the domestic industry;c. Permanent import restrictions based on the infant industry argument;d. Temporary import restrictions based on the infant industry argument;e. Temporary import restrictions that will be replaced by permanent tax breaks for the domestic industry;Which of the following is not an argument in favor of restricting trade?;a. To preserve national security;b. To prevent dumping;c. To increase consumer surplus;d. To protect infant industries;e. To protect declining industries;International trade between countries typically produces a winner and a loser. Generally, it is the economically more advanced country that gains at the expense of the less developed nation.;a. True b. False;An effect import quota is one that;a. Reduces imports to zero;b. Increases imports;c. Reduces the price of an imported good below the world price;d. Limits imports to less than what would be imported under free trade;e. Reduces demand for a good to zero;For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true concerning production possibilities curves in both countries?;a. The slope of the countries? production possibilities frontiers cannot be determined unless the number of workers in each country is known;b. The countries? production possibilities frontiers have the usual bowed-out shape;c. On a graph with cheese on the vertical axis, the slope of Germany?s production possibilities frontier is everywhere equal to 1/100;d. On a graph with cheese on the vertical axis, the slope of Germany?s production possibilities frontier is steeper than Denmark?s.;e. On a graph with cheese on the vertical axis, the slope of Germany?s production possibilities frontier is everywhere equal to negative 1/100;The international treaty established to negotiate lower trade restrictions is known as the;a. World Bank Act;b. General Agreement on Tariffs and Trade (GATT);c. International Association for Free Trade (IAFT);d. Countries United for Free Trade (CUFT);e. International Development Fund;The theory that changes in the exchange rate reflect only changes in the price level of two countries is called;a. The floating exchange rate theory;b. The fixed exchange rate theory;c. The flexible exchange rate theory;d. Purchasing power parity;e. The managed exchange rate theory;Under a flexible exchange rate system, which one of the following would not directly affect the exchange rate?;a. A change in income;b. The relative inflation rates in two countries;c. The salary of the president of the U.S.;d. A change in capital flows;e. A change in the level of exports;If fewer U.S. dollars are needed to buy a Swiss franc, then;a. Swiss goods become relatively more expensive to U.S. residents;b. U.S. residents buy fewer francs;c. U.S. goods become relatively cheaper to Swiss residents;d. U.S. residents buy more Swiss goods;e. U.S. residents supply more francs;The main goal of the Bretton Woods meeting was to;a. Curb inflation;b. Encourage gold production;c. Set world prices for gold;d. Set up a new international system of payments and to stabilize exchange rates;e. Help less-developed countries of the Third World to develop economically;The actions taken by arbitrageurs in the foreign exchange markets;a. Destabilize foreign exchange markets;b. Are highly risky;c. Have no effect on exchange rates;d. Help assure that exchange rates are equalized across all markets;e. Are the same as those undertaken by speculators;If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar;a. Both the U.S. dollar and the yen have appreciated;b. Both the U.S. dollar and the yen have depreciated;c. The U.S. dollar has appreciated and the yen has depreciated;d. The U.S. dollar has depreciated and the yen has appreciated;e. The yen has appreciated and the U.S. dollar has remained constant;The international financial system operated under a gold standard;a. From the 1500s through the present;b. From 1879 through the present;c. From 1879 to 1914;d. From 1914 to 1939;e. Never;Under fixed exchange rates, a central bank;a. Adjusts the money supply automatically and immediately to changes in the demand and supply of foreign exchange;b. Need hold no reserves of foreign exchange;c. Enforces the fixed exchange rate by refusing to buy or sell foreign exchange whenever changes occur in demand or supply;d. May find its reserve fluctuating as demand and supply conditions change;e. Has no authority to buy or sell foreign exchange;Which of the following does not describe the World Bank?;a. An economic development institution;b. Affiliated with the UN;c. Offers low-free checking accounts to anyone in the world;d. Estimates output per capita figures;e. Uses output per capital figures to classify economies;Disappointed with problems caused by being a recipient of foreign aid from donor governments, the country of Upsilon should consider;a. Refusing all future offers of aid;b. Privatizing of aid, such as receiving funds from private not-for-profit agencies;c. Becoming a donor instead;d. Seeking even more government-sponsored aid;e. All the answers are correct;Production and exchange depend on a reliable infrastructure of;a. Transportation;b. Communication;c. Sanitation;d. Electricity;e. All of the answers are correct;Compared to industrial market countries, developing counties usually have;a. Exports consisting mostly of agricultural products and raw materials;b. Faster population growth;c. Higher unemployment;d. Higher rates of illiteracy;e. All of the answers are correct;Which of the following is not an example of an institution (rules of the game)?;a. Formal rules of behavior;b. Government takeover of private corporations;c. A constitution;d. Informal constraints on behavior;e. Traditions;Which of the following resources is necessary to combine efficiently the other resources to produce goods and services?;a. Natural resources;b. Capital;c. Labor;d. Entrepreneurial ability;e. Financial institutions;The country of Yipi can raise its productivity by investing more in;a. Both human and physical capital;b. Human capital only;c. Physical capital only;d. Stable foreign economies;e. Stocks and bonds;When foreign aid is tied to purchases of low-priced food from the donor country, farm prices can drop in the developing countries, hurting poor farmers.;a. True b. False;There is a tremendous range in productive performance around the world;a. True b. False;Which of the following groups has the lowest life expectancy at birth?;a. Middle-income economies;b. Low-income economies;c. High-income economies;d. Sub-saharan African economies;e. All the world?s economies;As a contractionary gap is closed in the long run by firms' actions;a. nominal and real GDP both decline;b.nominal and real GDP both increase;c. nominal GDP increases but real GDP declines;d. nominal GDP declnes but real GDP increases;e. real GDP increases, but nominal GDP can increase, decrease, or remain the same;In 2007, if the country of Moolah had consumption of $20 trillion, gross investment of $4 trillion, government purchases of $5 trillion, and GDP of $26 trillion, then net exports must have been;a. + $3 trillion;b. + $29 trillion;c. -$29 trillion;d. -$3 trillion;e. the question cannot be answered without knowing the amount of imports;Given the following data: depreciation = $450, net indirect business taxes = $400, employee compensation =$3000, proprietor's income =$200, corporate profits=$400, net interest=$300, rental income=$50, national income equals;a. $3100;b. $3500;c. $3550;d. $3950;e. $4400;Which of the following would tend to shift the investment function upward?;a. higher interest rates;b. gloomy sales expectations;c. a cut in corporate taxes that rases after-tax profits;d. a decrease in the marginal propensity to consume;e. an increase in aggregate income;What is teh effect on the consumption function of an increase in disposable income?;a. The consumption function shifts upward;b. The consumption function shifts downward;c. There is movement upward along the consumption function;d. There is movement downward along the consumption function;e. the consumption function becomes much steeper;If C=$3000 +.9Y and income is $20000;a. consumption is $20000;b. consumption is $18000;c. saving is $0;d. saving is -$1000;e. income will increase to $200000;If C= a+bY, which of the following is true?;a. If a increases, autonomous saving will increase;b. If a increases, the multiplier will increase;c. If a increases, the multiplier will decrease;d. If b incrases, the multiplier will increase;e. If b increase, the multiplier will decrease.
Paper#21714 | Written in 18-Jul-2015Price : $37