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CHAPTER 12
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Business cycles result from (3)
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1) changes in aggregate demand
2) changes in aggregate supply
(3) changes in both aggregate demand and aggregate supply
4) greedy Wall Street executives
5) government intervention
2) changes in aggregate supply
(3) changes in both aggregate demand and aggregate supply
4) greedy Wall Street executives
5) government intervention
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The aggregate demand curve (1)
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(1) shows total spending in which the economy will engage at alternative price levels
2) implies an inverse relationship between inflation and unemployment
3) is identical to the aggregate expenditures curve
4) has the same slope as a demand curve
5) relates relative prices to the quantity demanded of a particular good
2) implies an inverse relationship between inflation and unemployment
3) is identical to the aggregate expenditures curve
4) has the same slope as a demand curve
5) relates relative prices to the quantity demanded of a particular good
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Other things equal, a decrease in aggregate demand will result in (3)
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1) an economic expansion
2) lower unemployment and a higher equilibrium price level
(3) an economic contraction
4) an increase in equilibrium real GDP and a decrease in the equilibrium level of prices
5) increased economic welfare
2) lower unemployment and a higher equilibrium price level
(3) an economic contraction
4) an increase in equilibrium real GDP and a decrease in the equilibrium level of prices
5) increased economic welfare
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Demand-pull inflation is caused by an (2)
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1) increase in aggregate supply
(2) increase in aggregate demand
3) increase in the demand for a particular good
4) decrease in the supply of a particular good
5) decrease in aggregate demand
(2) increase in aggregate demand
3) increase in the demand for a particular good
4) decrease in the supply of a particular good
5) decrease in aggregate demand
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Which of the following would cause cost-push inflation? (2)
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1) lower income tax rates
(2) oil-exporting countries restricting oil supplies
3) an increase in government spending
4) depreciation of the domestic currency
5) all of these would cause cost-push inflation
(2) oil-exporting countries restricting oil supplies
3) an increase in government spending
4) depreciation of the domestic currency
5) all of these would cause cost-push inflation
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Which of the following is not one of the four components of the aggregate expenditures of an economy? (3)
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1) government spending
2) consumption
(3) capitalistic spending
4) net exports
5) investment
2) consumption
(3) capitalistic spending
4) net exports
5) investment
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Investment spending increases with (5)
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1) lower interest rates
2) rapid technological change
3) a decrease in the price of capital goods
4) production levels near capacity
(5) all of these
2) rapid technological change
3) a decrease in the price of capital goods
4) production levels near capacity
(5) all of these
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An upward-sloping aggregate supply curve indicates that (2)
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1) higher prices lead to less consumption
(2) higher prices lead to increased production
3) lower prices lead to increased production
4) the amount of real GDP produced falls as prices increase
5) lower prices decreases the supply of labor
(2) higher prices lead to increased production
3) lower prices lead to increased production
4) the amount of real GDP produced falls as prices increase
5) lower prices decreases the supply of labor
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The upward-sloping aggregate supply curve represents (4)
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1) increases in national output that are accompanied by decreases in the average price level
2) increases in national output but fixed price level
3) increases in the average price level but fixed national output
(4) increases in national output that are accompanied by increases in the average price level
5) fixed national output and a fixed price level
2) increases in national output but fixed price level
3) increases in the average price level but fixed national output
(4) increases in national output that are accompanied by increases in the average price level
5) fixed national output and a fixed price level
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Other things equal, an increase in government spending (3)
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1) increases the slope of the aggregate demand curve
2) increases the slope of the aggregate supply curve
(3) increases aggregate expenditures
4) shifts the aggregate demand curve to the left
5) reduces the equilibrium level of GDP
2) increases the slope of the aggregate supply curve
(3) increases aggregate expenditures
4) shifts the aggregate demand curve to the left
5) reduces the equilibrium level of GDP
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CHAPTER 13 HANDOUT
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The misery index is defined as (2)
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1) potential GDP minus real GDP
(2) the sum of the unemployment rate and the inflation rate
3) the difference between potential GDP and actual GDP
4) the unemployment rate minus the inflation rate
5) the inflation rate minus the unemployment rate
(2) the sum of the unemployment rate and the inflation rate
3) the difference between potential GDP and actual GDP
4) the unemployment rate minus the inflation rate
5) the inflation rate minus the unemployment rate
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Fiscal Policy refers to (5)
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1) the use of fines to penalize unfair business practices
2)the purchase and sale of US government securities to regulate the money supply
3) the adjustment of the GDP for inflation
4) a policy action by Congress to overrule unpopular budget cuts by the president
(5) the use of government spending and taxation to influence the level of economic growth and inflation
2)the purchase and sale of US government securities to regulate the money supply
3) the adjustment of the GDP for inflation
4) a policy action by Congress to overrule unpopular budget cuts by the president
(5) the use of government spending and taxation to influence the level of economic growth and inflation
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Taxes affect aggregate demand (1)
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(1) indirectly by changing consumption
2) indirectly by changing investment spending
3) indirectly by changing net exports
4) directly by changing disposable income
5) directly through government spending
2) indirectly by changing investment spending
3) indirectly by changing net exports
4) directly by changing disposable income
5) directly through government spending
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Refer to Figure 13.1. If the economy is in equilibrium at point C, then other things being equal, an increase in government spending will (4)
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1) decrease the price level
2) lower real GDP and leave the price level unchanged
3) lower real GDP and increase the price level
(4) increase the price level and leave real GDP unchanged
5) have no effect on real GDP or the price level
2) lower real GDP and leave the price level unchanged
3) lower real GDP and increase the price level
(4) increase the price level and leave real GDP unchanged
5) have no effect on real GDP or the price level
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Which of the following is NOT a means to finance government spending? (1)
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(1) Government subsidies
2) personal income taxes
3) money creation
4) Government debt
5) capital gains taxes
2) personal income taxes
3) money creation
4) Government debt
5) capital gains taxes
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Crowding out refers to a (4)
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1) increase in the consumption of domestic goods and services at the expense of imports
2) increase in the consumption of imports at the expense of domestic goods and services
3) decrease in exports because of higher government spending
(4) decrease in consumption or investment spending caused by increased government spending
5) decrease in government spending caused by higher private-sector spending
2) increase in the consumption of imports at the expense of domestic goods and services
3) decrease in exports because of higher government spending
(4) decrease in consumption or investment spending caused by increased government spending
5) decrease in government spending caused by higher private-sector spending
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Once Congress receives the president's budget, the (1) studies it and committees modify it before funds are appropriated
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(1) Congressional Budget Office (CBO)
2) Congressional committee on presidential affairs
3) Congressional committee for mutual understanding
4) Office of management and budget
5) Accounting and balancing office
2) Congressional committee on presidential affairs
3) Congressional committee for mutual understanding
4) Office of management and budget
5) Accounting and balancing office
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When federal expenditures grow faster than tax revenues, the government will experience a (4)
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1) declining budget deficit
2) declining national debt
3) increasing budget surplus
(4) increasing budget deficit
5) balanced budget
2) declining national debt
3) increasing budget surplus
(4) increasing budget deficit
5) balanced budget
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The national debt is (5)
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1) current budget deficit
2) product of past budget deficit
3) product of past budget deficits plus the interest outstanding
4) current budget deficit plus the interest outstanding
(5) stock of government bonds outstanding
2) product of past budget deficit
3) product of past budget deficits plus the interest outstanding
4) current budget deficit plus the interest outstanding
(5) stock of government bonds outstanding
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Total unemployment compensation increases during recessions with no change in benefit rates, which is an example of (3)
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1) balanced-budget policy
2) the crowding-out effect
(3) automatic stabilizers
4) discretionary fiscal policy
5) regressive taxation
2) the crowding-out effect
(3) automatic stabilizers
4) discretionary fiscal policy
5) regressive taxation
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