Basic Macro Relationships
Aggregate Expenditures Model
AD and AS
Fiscal Policy
Anything goes...
100
True or False. MPC + MPS =1.
True
100
True or False. A country experiencing positive net exports will also experience positive economic growth related to trade.
True
100
A decrease in the price level will:
A. shift the short-run aggregate supply curve to the left
B. move the economy down along a stationary short-run aggregate supply curve
C. move the economy up along a stationary short-run aggregate supply curve
B. move the economy down along a stationary short-run aggregate supply curve
100
What are tools used by governments to implement fiscal policy?
Government spending and taxation.
100
What are examples of expansionary fiscal policy measures?
Increased government spending or tax cuts.
200
If the MPC is 0.6, the multiplier will be...
2.5 (1/0.4)
200
Full-employment GDP is also known as:
A. realized GDP
B. balanced-budget GDP
C. potential GDP
C. potential GDP
200
True or False. Increased government regulation shifts the AS curve to the right.
False.
200
A situation where government spending exceeds revenue.
Budget deficit
200
This former President's famous expression during an election season was "read my lips, no new taxes".
Who is George Bush Sr.
300
True or False. The higher the MPC, the greater the spending multiplier effect.
True.
300
If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by
A. increasing government spending by $4 billion.
B. increasing government spending by $40 billion.
C. decreasing taxes by $4 billion.
D. increasing taxes by $4 billion.
A. increasing government spending by $4 billion.
300
If a positive technological change occurs in the economy,
A. the long-run aggregate supply curve will shift to the right
B. we will move up along the long-run aggregate supply curve
C. the long-run aggregate supply curve will shift to the left
A. the long-run aggregate supply curve will shift to the right
300
What are the goals of contractionary fiscal policy?
Decreasing inflationary pressures, stabilizing prices, and reducing budget deficits.
300
How does a budget surplus impact aggregate demand?
It reduces aggregate demand by withdrawing money from the economy.
400
True or False. If the economy's consumption schedule shifts up, then the Savings schedule must shift up as well.
False.
400
The key idea of the aggregate expenditure model is that the goal in any particular year is that the level of ______ is determined mainly by the level of aggregate expenditure.
A. export spending
B. government spending
C. GDP
C. GDP
400
Refer to the chart. A decrease in consumer confidence will shift the ____ curve to the ____.
AD curve to the left.
400
Refer to the diagram. The degree of built-in stability in the economy could be increased by
A. reducing government purchases so that the purchases line shifts downward but parallel to its present position.
B. changing the tax system so that the tax line is shifted downward but parallel to its present position.
C. changing the tax system so that the tax line has a greater slope.
D. altering the government expenditures line so that it has a positive slope.
C. changing the tax system so that the tax line has a greater slope.
400
The federal budget for the fiscal year must be passed by this date.
What is October 1st.
500
Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the
(a) MPC is greater in B than in A.
(b) APC at any given income level is greater in B than in A.
(c) MPS is smaller in B than in A.
(d) MPC is greater in A than in B.
D. MPC is greater in A than in B.
500
Refer to the diagram for a private closed economy. The equilibrium level of GDP is
A. $400.
B. $300.
C. $200.
D. $100.
B. $300
500
Refer to the chart. An increase in labor productivity will shift the _____ curve to the _____ .
AS curve to the right.
500
Given the above diagram, which area represents a recession?
To the left of GDP2
500
This type of tax protects domestic industry.
What are protective tariffs.