AS/AD
Classical VS Keynes
Multipliers
Fiscal Policy
Miscellaneous
100
An increase in labor productivity will have this effect on the AS/AD graph
What is shift the AS line to the right.
100
According to John Keynes, what is the government's role in the economy during troubling times?
What is active involvement through manipulation of spending and taxes.
100
If marginal propensity to consume is 0.8, what is the largest total increase in Real GDP that can result from $500 of new spending?
What is $2,500
100
what is appropriate fiscal policy to fight a recession?
What is lower taxes and/or increase spending.
100
What does MPC stand for?
What is Marginal Propensity to Consume.
200
If the business cycle is in its expansion phase, what would we most likely see change on the AS/AD graph?
What is an AD shift to the right
200
According to John Keynes, increased government spending during a recession would have what effect on price levels and Real GDP?
What is no effect on price levels and an increase in Real GDP
200
The tax multiplier increases in magnitude when
a. the MPS increases
b. The spending multiplier falls
c. The MPC increases
d. Government spending increases
e. taxes increase
The MPC increases
200
In a long period of economic expansion the tax revenue collected _____ and the amount spent on welfare programs ______, creating a budget _______.
what is increases, decreases and surplus.
200
A severe, sustained increase in oil prices could lead short run and long run supply shocks. What is this known as?
What is stagflation.
300
an increase in labor productivity would most likely cause Real GDP and price levels to change is what ways?
RGDP to increase and price levels to decrease.
300
What is the classical economist explanation for how the economy will recover from a recession?
What is over a long period of time the cost of resources, including labor, will reduce allowing Aggregate supply to shift right.
300
With the budget initially in balance, suppose that the federal government increases spending by $20 billion. The increase in spending is financed by a $20 billion tax increase. What will be the impact on Real GDP?
The Real GDP will increase.
300
For Government deficit spending to occur what must be true of spending and taxation?
Government spending must exceed taxes.
300
If Real GDP changed from 500 billion to 400 billion when consumer spending decreased, how would that be reflected on a Phillips Curve?
What is a dot moving down and to the right.
400
This is the explanation as to why the LRAS rarely ever changes.
What is it is rare for society to have universally adopted changes in production techniques and/or labor.
400
Draw how John Keynes feels the classic economist have the AS/AD graph wrong (what is his view of how the graph should look?)
400
If Maria's disposable income increases from $600 to $650 and her level of personal consumption expenditures increases from $480 to $520, her marginal propensity to save must be?
0.20
400
The leftward shift in AD from decreased consumer spending in response to rising interest rates from expansionary fiscal policy is known as
What is the Crowding Out Effect.
400
Why does John Keynes state that an Aggregate Supply curve should be drawn with a sharp left turn?
What is during a recession, resources prices rarely decrease, so we don't experience deflation.
500
An increase in personal income taxes will most likely result in what changes in Real GDP and price levels in the short run
what is decrease in RGDP and a decrease in Price Levels.
500
According to Keynesian analysis, if government expenditures and taxes are increased by the same amount, what will happen to Aggregate Demand and the Real GDP?
What is AD will shift right and Real GDP will increase.
500
If the tax multiplier is 4 and consumer expenditures increase by 20 billion, what will be the impact on Real GDP?
What is 100 billion.
500
What is a drawback of using fiscal policy to correct a recessionary gap?
What is it leads to an increase in Price Levels.
500
A rapid increase in successful research and development projects for the nation will most likely result in which of the following changes in the short-run and the long-run aggregate supply curves and the production possibilities curve?
What is right shift of SRAS, LRAS and PPC