macro 2

  When consumer confidence falls in an economy, _____ will decrease which is going to be _____ by the spending multiplier. Selected Answer: Incorrect taxes; magnified Answers: spending; unaffected Correct spending; magnified taxes; unaffected taxes; magnified Question 2 0 out of 1 points What does the "paradox of thrift" say? Selected Answer: Incorrect [None Given] Answers: People who consume too much will go broke. Businesses that are greedy will make the most profit. Correct An economy that saves too much can end up with lower total savings. People who save too little are harming the economy. Question 3 0 out of 1 points How does the spending multiplier compare between a $1,000 increase in government spending and a $1,000 decrease in taxes collected? Selected Answer: Incorrect [None Given] Answers: Correct An increase in government spending has a greater spending multiplier than an equivalent tax decrease. An increase in government spending has a smaller spending multiplier than an equivalent tax decrease. An increase in government spending has the same spending multiplier as an equivalent tax decrease. Neither an increase in government spending nor a decrease in taxes generates any multiplier at all. Question 4 0 out of 1 points According to the balanced budget multiplier, an increase in government spending of $10,000 that is financed by an increase of $10,000 in taxes will have what effect on the economy when MPC is 0.80? Selected Answer: Incorrect [None Given] Answers: Income will not change. Income will increase by $8,000. Correct Income will increase by $10,000. Income will increase by $50,000. Question 5 0 out of 1 points If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n) _____ gap exists and will require a(n) _____ in spending to bring the economy back to full employment. Selected Answer: Incorrect [None Given] Answers: recessionary; increase recessionary; decrease inflationary; increase Correct inflationary; decrease Question 6 0 out of 1 points image The figure shows the aggregate expenditures line for an economy. Which is the proper sequence of events if income was originally at $100? Selected Answer: Incorrect [None Given] Answers: Total spending exceeds income, firms reduce production, workers are laid off, and incomes fall until equilibrium is reached. Total income exceeds spending, firms expand production, workers are hired, and incomes rise until equilibrium is reached. Correct Total spending exceeds income, firms expand production, workers are hired, and incomes rise until equilibrium is reached. Total income exceeds spending, firms reduce production, workers are laid off, and incomes fall until equilibrium is reached. Question 7 0 out of 1 points Suppose the marginal propensity to consume in Economia is 0.75. People feel increasing confidence in their economy and spend $5 billion more on vacations. Equilibrium income will rise by $: Selected Answer: Incorrect [None Given] Answers: 75 billion. 4 billion. 5 billion. Correct 20 billion. Question 8 0 out of 1 points If the marginal propensity to save is 0.20, the spending multiplier is: Selected Answer: Incorrect [None Given] Answers: 10.00. 0.20. Correct 5. 5.55. Question 9 0 out of 1 points In the simple Keynesian model with no government and foreign sectors, assume that full employment occurs at an output level of $20,000. With a marginal propensity to save of 0.20 and equilibrium output at $15,000, by how much will investment spending have to increase to move the economy to full employment? Selected Answer: Incorrect [None Given] Answers: Correct $1,000 $5,000 $2,500 $2,000 Question 10 0 out of 1 points What occurs when spending is above the full employment level? Selected Answer: Incorrect [None Given] Answers: Correct inflationary gap depressionary gap recessionary gap contractionary gap Question 11 0 out of 1 points Assume that the MPC is 0.75. Full employment is considered to be at a GDP level of $500 billion. The GDP is $600 billion. What should the government do to achieve full employment? Selected Answer: Incorrect [None Given] Answers: increase spending by $25 billion increase spending by $10 billion Correct reduce spending by $25 billion reduce spending by $100 billion Question 12 1 out of 1 points Potential GDP Selected Answer: Correct is independent of the price level. Answers: increases as the price level increases because firms supply more goods and services. decreases as the price level increases because people demand fewer goods and services. might either increase or decrease as the price level increases, depending on whether aggregate demand increases or decreases. Correct is independent of the price level. Question 13 0 out of 1 points If disposable income increases from $5,000 to $5,400 and consumption increases from $4,000 to $4,200, what is the average propensity to consume when disposable income is $5,400? Selected Answer: Incorrect [None Given] Answers: Correct 0.78 0.22 0.65 0.35 Question 14 0 out of 1 points The short run aggregate supply curve shows the relationship between Selected Answer: Incorrect [None Given] Answers: potential GDP and the price level. potential GDP and real GDP. Correct the quantity of real GDP supplied and the price level. the quantity of real GDP supplied and the interest rate Question 15 0 out of 1 points If the cost of production increase, there is Selected Answer: Incorrect [None Given] Answers: an increase in aggregate supply and the SRAS curve shifts rightward. Correct a decrease in aggregate supply and the SRAS curve shifts leftward. an increase in the quantity of real GDP supplied and a movement up along the SRAS curve. a decrease in the quantity of real GDP supplied and a movement down along the SRAS curve. Question 16 0 out of 1 points Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil? Selected Answer: Incorrect [None Given] Answers: Correct The SRAS curve shifts rightward. There is no change to the SRAS curve. The SRAS curve does not shift but there is an upward movement along it. The SRAS curve does not shift but there is a downward movement along it. Question 17 0 out of 1 points image Refer to the figure. The potential level of output occurs at Selected Answer: Incorrect [None Given] Answers: Y1. Correct Y2. Y3. both Y1 and Y3. Question 18 0 out of 1 points Other things the same, if technology increases, then in the long run Selected Answer: Incorrect [None Given] Answers: both output and prices are higher. Correct output is higher and prices are lower. output is lower and prices are higher. both output and prices are lower. Question 19 0 out of 1 points _____ occurs when aggregate demand expands so much that equilibrium output exceeds full employment output. Selected Answer: Incorrect [None Given] Answers: Correct Demand-pull inflation Demand-push inflation Cost-push inflation Cost-pull inflation Question 20 0 out of 1 points image Assume the economy depicted in the figure above is in long-run equilibrium, where the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0. If there is a supply shock, such as a drastic increase in the price of oil, this will cause a _____ and a movement to a short-run equilibrium at point _____. Selected Answer: Incorrect [None Given] Answers: leftward shift to AD1; a rightward shift to AD1; c rightward shift to SRAS2; c Correct leftward shift to SRAS2; a Question 21 0 out of 1 points What would cause inflation and employment to increase? Selected Answer: Incorrect [None Given] Answers: a leftward shift of the AS curve a leftward shift of the AD curve a rightward shift of the AS curve Correct a rightward shift of the AD curve Question 22 0 out of 1 points Cost-push inflation occurs when: Selected Answer: Incorrect [None Given] Answers: total spending expands so much that equilibrium output exceeds full-employment output. a supply shock shifts the short-run aggregate supply curve to the right. Correct rising resource costs reduce short-run aggregate supply. subsidies to businesses rise. Question 23 0 out of 1 points image Refer to the Figure. Assuming the country begins on the long-run equilibrium, what will happen in the short-run if the price of oil rises significantly? Selected Answer: Incorrect [None Given] Answers: The economy will move from point C to E. The economy will move from point B to E. Correct The economy will move from point C to A. The economy will move from point B to C. Question 24 0 out of 1 points Imagine that in the current year the economy is in long-run equilibrium. Then the federal government reduces its purchases of goods by 50%. Which curve shifts and in which direction? Selected Answer: Incorrect [None Given] Answers: Correct Aggregate demand shifts left. Aggregate demand shifts right. Aggregate supply shifts left. Aggregate supply shifts right. Question 25 0 out of 1 points If people's expectations about future income improve so they think their future income will be higher than previously believed, then the AD curve Selected Answer: Incorrect [None Given] Answers: will not change until income actually rises. will shift leftward because people will spend less now. Correct will shift rightward because people will increase spending now. and the AS curve will both shift leftward because people will increase their saving. Question 26 0 out of 1 points The “sticky-wage” hypothesis explains the Selected Answer: Incorrect [None Given] Answers: slope of the aggregate demand curve Correct slope of the short-run aggregate supply curve slope of the long-run aggregate supply curve position of the aggregate demand curve Question 27 0 out of 1 points image The above table has data from the nation of Atlantica. Based on these data, autonomous consumption is Selected Answer: Incorrect [None Given] Answers: Correct $1.8 trillion. $2.6 trillion. $3.2 trillion. $4.0 trillion. Question 28 0 out of 1 points Public debt owned by U.S. banks, corporations, mutual funds, pension plans, and individuals is called _____ debt. Selected Answer: Incorrect [None Given] Answers: Correct internally held personal proper national Question 29 0 out of 1 points If interest rates rise, the burden of a nation's public debt will _____ and it will be _____ difficult to service its debt. Selected Answer: Incorrect [None Given] Answers: fall; less fall; more rise; less Correct rise; more Question 30 0 out of 1 points According to the crowding-out effect, if the government sells bonds to finance spending, _____ can eventually fall. Selected Answer: Incorrect [None Given] Answers: consumption and government expenditures government expenditures and investment Correct consumption and investment exports and investment Question 31 0 out of 1 points Which of the following is an example of an expansionary fiscal policy tool? Selected Answer: Incorrect [None Given] Answers: Decreasing government spending and increasing taxes. Correct Increasing government spending and decreasing taxes. Increasing government regulations on businesses. Selling government bonds in the open market. Question 32 0 out of 1 points All of these programs are considered mandatory spending EXCEPT: Selected Answer: Incorrect [None Given] Answers: Social Security. Medicare. Correct national defense. interest on national debt. Question 33 0 out of 1 points If an economy is in a recession, what would expansionary fiscal policy do? Selected Answer: Incorrect [None Given] Answers: Correct shift AD to the right shift AD to the left shift SRAS to the right shift SRAS to the left Question 34 0 out of 1 points A recessionary gap is Selected Answer: Incorrect [None Given] Answers: Correct a situation where the actual level of output is below the potential level of output. a situation where aggregate demand exceeds aggregate supply. a situation where the economy is operating at its full potential output. a situation where the government increases its spending to stimulate economic growth. Question 35 0 out of 1 points If the ultimate goal of fiscal policy aimed at aggregate supply is achieved, what happens to the aggregate price level and aggregate output? Selected Answer: Incorrect [None Given] Answers: aggregate price level decreases; aggregate output decreases aggregate price level increases; aggregate output increases Correct aggregate price level decreases; aggregate output increases aggregate price level increases; aggregate output decreases Question 36 0 out of 1 points Which of these is an example of an automatic stabilizer? Selected Answer: Incorrect [None Given] Answers: consumers spending more when the economy is strong business laying off workers during a recession Correct unemployed workers claiming unemployment benefits during a recession the government raising interest rates to reduce inflation Question 37 0 out of 1 points If the national debt is $6 million and this year's deficit is $5 million, what would the new national debt be? Selected Answer: Incorrect $275 million Answers: Correct $11 million $50 million $60 million $275 million Question 38 0 out of 1 points If the economy is at full employment, increases in government spending: Selected Answer: Incorrect [None Given] Answers: have a multiplier effect on equilibrium output. have no effect on the aggregate price level. Correct are primarily absorbed by price increases. reduce aggregate output. Question 39 0 out of 1 points A What is stagflation in economics? Selected Answer: Incorrect [None Given] Answers: A period of high economic growth accompanied by low inflation. A period of economic recession with falling prices. Correct A period of economic recession with rising prices. A state of economic equilibrium with no price or output changes. Question 40 0 out of 1 points There are four limitations to the effectiveness of discretionary fiscal policy. Which item below is NOT one of these limitations? Selected Answer: Incorrect [None Given] Answers: shrinking area of law-maker discretion law-making time lag estimating potential GDP Correct fiscal multiplier