question
An economy that does not have interactions in trade or finance with other economies is referred to as...
answer
a closed economy.
question
Which of the following would increase net exports in the United States?
answer
the government of Mexico purchases 500 Ford F-150 pickup trucks from the United States.
question
Which of the following would increase the current account balance of the United States?
answer
an increase in the balance of trade.
question
Fiscal policy refers to changes in...
answer
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
question
A recession tends to cause the federal budget deficit to ______ because tax revenues ______ and government spending on transfer payments _______.
answer
increase; fall; rise.
question
The cyclically adjusted budget deficit or surplus measures what the deficit or surplus would be if the economy were...
answer
at potential GDP.
question
Based on the following info, what is the balance on the financial account?
-exports= $5 billion
-imports= $3 billion
-net income= -$2 billion
-net transfers= -$2 billion
-increase in foreign holdings of assets in US= $4 billion
-increase in US holdings of assets in foreign countries= $1 billion
-exports= $5 billion
-imports= $3 billion
-net income= -$2 billion
-net transfers= -$2 billion
-increase in foreign holdings of assets in US= $4 billion
-increase in US holdings of assets in foreign countries= $1 billion
answer
$3 billion
question
Monetary policy refers to the actions the Federal Reserve takes to manage...
answer
the money supply and interest rates to pursue its economic objectives.
question
Which of the following would cause the money demand curve to shift to the left?
answer
a decrease in real GDP.
question
Suppose the government increases expenditures by $60 billion and the marginal propensity to consume is 0.80; by how much will equilibrium GDP change?
answer
$300 billion.
question
Disease, poor nutrition, and substandard health care in developing nations can reduce growth in an economy by...
answer
reducing human capital.
question
Which of the following would NOT be considered an automatic stabilizer?
answer
legislation increasing funding for job retraining passed during a recession.
question
Which of the following is an example of foreign direct investment in China?
answer
the US company Wal-Mart buys a warehouse in Shanghai.
question
If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion, what is the balance on the capital account, assuming no statistical discrepancy?
answer
-$142 billion
question
Which of the following describes what the Fed would do to pursue an expansionary monetary policy?
answer
use open market operations to buy Treasury bills.
question
If the nominal exchange rate between the American dollar and the Canadian dollar is ).89 Canadian dollars per American dollar, how many American dollars are required to buy a product that costs 2.5 Canadian dollars?
answer
$2.81
question
Which of the following would be considered a fiscal policy action?
answer
a tax cut is designed to stimulate spending during a recession.
question
When the market value of the dollar rises relative to other currencies around the world, we say that...
answer
the dollar has appreciated.
question
An increase in government purchases will increase aggregate demand because...
answer
government expenditures are a component of aggregate demand.
question
Currency traders expect the value of the dollar to fall. What effect will this have on the demand and supply of dollars in the foreign exchange market?
answer
demand for dollars will decrease, and supply of dollars will increase.
question
Contractionary monetary policy on the part of the Fed results in...
answer
a decrease in the money supply, an increase in interest rates, and a decrease in GDP.
question
An increase in individual income taxes _____ disposable income, which ______ consumption spending,
answer
decreases; decreases.
question
If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is...
answer
5%.
question
If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in...
answer
government purchases.
question
An increase in the demand for American-made goods will...
answer
increase the demand for dollars on the foreign exchange market.
question
If the exchange rate changes from 1pound=$2 to 1pound=$2.01, then...
answer
the dollar has depreciated.
question
A lumberjack loses his job because timber cutting restrictions are imposed by the EPA to protect the spotted owl habitat; this lumberjack would be...
answer
structurally unemployed.
question
If the dollar appreciates, how will aggregate demand in the US be affected?
answer
aggregate demand will shift to the left as imports increase.
question
If you have trouble finding a job because of a recession in the US economy, we would say that you are...
answer
cyclically unemployed.
question
To combat a recession with discretionary fiscal policy; Congress and the president should...
answer
decrease taxes to increase consumer disposable income.
question
Which of the following policies would reduce frictional unemployment?
answer
building an online job database that helps workers find jobs.
question
An appreciating yen makes Japanese products...
answer
more expensive in foreign markets.
question
If net exports are positive,...
answer
net foreign investments is also positive.
question
Sarah is a full-time student who is not looking for work; what kind of unemployment is Sarah experiencing?
answer
Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.
question
Suppose that real GDP for 2015 was $10,000 billion and real GDP 2016 was $10,200 billion; what is the rate of growth of real GDP between 2015-2016?
answer
2%
question
Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ______ effect.
answer
multiplier.
question
What two factors are keys to determining labor productivity?
answer
technology and the quantity of capital per hour worked.
question
The percent increase in the CPI from one year to the next is a measure of the...
answer
inflation rate.
question
When additions of capital to a fixed quantity of another input lead to progressively smaller increases in output, we say we are facing...
answer
diminishing returns.
question
Which of the following is an example of foreign portfolio investment?
answer
the purchase of a US Treasury bond by a German citizen.
question
What is the tax multiplier if a $200 billion tax increase results in a $300 billion in GDP, holding all else constant?
answer
-1.5
question
An underground economy involves all of the following except...
answer
buying and selling of goods and services by obtaining a permit from the government.
question
Suppose you deposit $1700 cash into your checking account; by how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.20?
answer
$8500
question
A recession occurs when an economy experiences a period in which there is...
answer
a decrease in total production.
question
In a closed economy, public saving plus private saving is equal to...
answer
investment.
question
Expansionary monetary policy will have what effect on the components of aggregate demand?
answer
consumption, investment, and net exports will rise.
question
Enforcing property rights in an economy will...
answer
raise the level of investment.
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