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Question;1 of 30Which of the following would shift the aggregate demand curve to the right?An increase in government spendingAn increase in taxesAn increase in interest ratesAn increase in input pricesQuestion2 of 30Fiscal policy refers to themanipulation of the money supply in order to increase the amount of paper currency in circulation.adjustment of government spending and taxes in order to achieve certain national economic goals.adjustment of national income data to account for price level changes.changing way that unemployment data is calculated so as to make it appear that unemployment is lower than it actually is.Question3 of 30If the economy is experiencing an inflationary gap and the government wants to accelerate the adjustment to the long-run equilibrium, it shouldreduce aggregate demand by cutting government spending or raising taxes.reduce aggregate demand by increasing government spending or cutting taxes.increase aggregate supply by cutting government spending or raising taxes.increase aggregate supply by increasing government spending or lowering taxes.Question4 of 30Refer to the above figure. If the relevant aggregate demand curve is AD2, what is the current economic situation?Inflationary gapRecessionary gapEquilibriumOveremploymentQuestion5 of 30Supply-side economics focuses on tax cuts to stimulateaggregate demand by reducing saving.aggregate supply by increasing production.government spending.military research.Question6 of 30According to the Laffer curve, increases in the tax rate will lead to a(n)steady decrease in tax revenues.steady increase in tax revenues.initial decrease in tax revenues and then an increase in tax revenues.initial increase in tax revenues and then a decrease in tax revenues.Question7 of 30Which of the following are lags with which fiscal policy makers must cope?Recognition time lagsAction time lagsEffect time lagsAll of the aboveQuestion8 of 30Once either expansionary or contractionary fiscal policy has been undertakenaggregate demand will respond quickly and the problems in the economy will be corrected.aggregate demand will respond quickly in the short run but the economy will not improve in the long run.a time lag exists between implementation and the results of the policy.taxes will need to be adjusted because of the recognition time lag.Question9 of 30When real gross domestic product (GDP) falls, which of the following will automatically occur?A decrease in all tax ratesA decrease in income tax revenuesA decrease in unemployment compensation expendituresAn increase in income tax revenuesQuestion10 of 30Provisions that cause changes in government spending and taxes that do not require action of the President or Congress are calleddiscretionary fiscal policy.discretionary stabilizers.automatic stabilizers.private stabilization effects.Question11 of 30How does a government budget deficit occur?A government's tax revenues exceed its spending.A government's spending exceeds its tax revenues.If a nation carries a public debt, it must be running a deficit every year.A nation earns more on exports than it spends on imports.Question12 of 30If the government's spending exactly equals its revenues during a budget year, that government isrunning a budget deficit.experiencing a budget surplus.balancing its budget.paying off its public debt.Question13 of 30How does the federal government finance a budget deficit?It redeems its IOUs.It purchases U.S. Treasury bonds.It cuts spending on entitlement programs.It borrows funds by selling U.S. Treasury bonds.Question14 of 30The public debt can be thought of asthe total amount that consumers owe on their credit cards.the total amount in taxes that consumers pay to the government.accumulated budget deficits and surpluses.the total amount that the government spends on goods and services.Question15 of 30When was the last year that the United States had a budget surplus?2009198419932001Question16 of 30Expressing the U.S. federal budget deficit as a percentage of GDPresults in inflation-adjusted revenue and expenditure numbers.helps people to understand the size of the deficit relative to the size of the economy.was useful through the 1980s, but is no longer helpful because both the deficit and real Gross Domestic Product (GDP) have grown so only useful if the budget deficit is rising at an annual rate of more than 4%.Question17 of 30According to the textbook, approximately what percentage of U.S. net public debt is held by foreign residents?20%50%800%90%Question18 of 30The amount of funds that the Social Security system has loaned the federal government isincluded in the net public debt.added to the gross public debt to calculate the net public debt.not included in the gross public debt.excluded from the net public debt.Question19 of 30Which is the fastest growing component of the federal government budget?Spending on the military and the war on terrorismSpending to improve the nation's schoolsSpending to improve and expand the nation's infrastructureSpending on entitlementsQuestion20 of 30Money functions as a(n)store of value.unit of account.medium of exchange.All of the aboveQuestion21 of 30Money is defined asa person's net worth.anything that people generally accept in exchange for goods and services.a byproduct of a barter economy.any financial instrument that is backed by gold.Question22 of 30The degree to which an asset can be acquired or disposed of without much loss of nominal value or transaction costs is known asfiat of 30The opportunity cost of holding money is measured bya dollar.the price of government bonds.the interest yield that could have been earned by holding some other asset.the liquidity of interest-bearing assets.Question24 of 30The reason that people are willing to accept money with no intrinsic value is thatpaper currency may be exchanged for full-bodied money.the money supply is backed by an equal amount of gold and silver.there is a fiduciary monetary system in which currency has both acceptability and predictability of value.the value of the money varies directly with changes in the price level.Question25 of 30The designate M1 measure of money consists ofthe most liquid types of money in the U.S. system.small time deposits cards and ATM and gold coins.Question26 of 30The central bank for the United States isChase Manhattan Bank.the Congressional Bank.the Federal Reserve System.First National Bank of New York.Question27 of 30It is widely believed that the Federal Reserve's most important function isto provide loans to the federal regulate the money set the legal, controlled consumer interest lend to risky customers.Question28 of 30Fractional reserve banking is a system in whichdepository institutions pay a fraction of advertised interest rates.a fraction of banking services must be provided by depository institutions.depository institutions hold a fraction of total deposits in reserve.the money supply is a set fraction of the U.S. gold reserves.Question29 of 30In order to reach the maximum money multiplier, it is assumed thatcommercial banks keep the amount of reserves equal to total bank deposits.all loans get redeposited in a checkable account.there is insufficient loan are diverted into circulating currency.Question30 of 30By affecting the amount of reserves in the banking system, the Fed canaffect the size of the money supply.change the marginal tax rates.increase government purchases.reduce government purchases.1. What shape did the short-run aggregate supply curve have during the 1930s, according to Keynes? Explain. (5 points)2. What is the multiplier? How is it calculated? Why is the multiplier related only to consumption spending? (5 points)3.What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment? Be sure to discuss the effects in the short run and long run. (5 points)4.. Suppose that the Fed purchases $1 million in bonds in the open market. Explain how the money supply can increase by more than $1 million. (5 points)5.. What happens to the price of bonds when the Fed sells bonds? What happens to the interest rate? What happens to the money supply? (5 points)Additional Requirements


Paper#55891 | Written in 18-Jul-2015

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