The long-run Phillips curve is:
A.vertical, but unrelated to the NAIRU.
B.vertical at the non-accelerating-inflation rate of unemployment (NAIRU).
C.the same as the short-run Phillips curve.
D.negatively sloped, showing an inverse relationship between unemployment and inflation.
E.positively sloped, showing a direct relationship between unemployment and inflation.
1 points
Unemployment increases when
A.potential GDP increases.
B.aggregate demand increases.
C.an inflationary gap is created.
D.aggregate supply increases.
E.the government decreases its expenditures on goods and services.
The Phillips curve is ____ in the short run and ____ in the long run.
A.downward-sloping; vertical
B.upward-sloping; vertical
C.vertical; downward-sloping
D.downward-sloping; horizontal
E.upward-sloping; downward-sloping
The government has a budget deficit if:
A.its total revenues are greater than its total expenditures.
B.its total revenues are equal to its total expenditures.
C.the money supply is greater than the money demand.
D.the money supply is less than total expenditures.
E.its total revenues are less than its total expenditures.
The government has a budget deficit if:
A.its total revenues are greater than its total expenditures.
B.its total revenues are equal to its total expenditures.
C.the money supply is greater than the money demand.
D.the money supply is less than total expenditures.
E.its total revenues are less than its total expenditures.
When the government’s expenditures exceed its tax receipts, the national debt
A.grows to finance the budget surplus.
B.shrinks thanks to the budget deficit.
C.grows to finance the budget deficit.
D.does not change because it has nothing to do with government expenditures and tax receipts.
E.shrinks thanks to the budget surplus.
Expansionary fiscal policy:
A.increases long-run aggregate supply.
B.decreases long-run aggregate supply.
C.decreases aggregate demand.
D.increases short-run aggregate supply.
E.increases aggregate demand.
In an economy with no income taxes or imports, the expenditure multiplier is
A.equal to 1 if the MPC is greater than 1.
B.always less than 1 no matter what the size of the MPC.
C.less than 1 if the MPC is less than 1.
D.greater than 1 if the MPC is less than 1.
E.greater than 1 if the MPC is greater than 1.
The short-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when ____ remain(s) constant.
A.monetary policy
B.the natural unemployment rate and the expected inflation rate
C.fiscal policy
D.interest rates
E.aggregate demand
If the natural rate of unemployment is 5%, and the actual rate of unemployment is 4%:
A.inflation will increase.
B.disinflation is likely to occur.
C.the short-run Phillips curve will shift down.
D.there will be no effect on prices.
E.deflation is likely to occur.
The AD curve is a graph depicting the
A.relationship between the price level and the quantity of real GDP demanded.
B.relationship between the aggregate quantity of real GDP demanded and the aggregate quantity of real GDP supplied.
C.business cycle during expansions and recessions.
D.relationship between the price level and potential GDP.
E.relationship between the price level and the quantity of real GDP supplied.
Changing the level of government spending is an example of:
A.fiscal policy.
B.exchange rate policy
C.monetary policy
D.interest rate policy.
E.health care policy.
Suppose the economy is experiencing an inflationary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:
A.decrease tax rates.
B.lower the federal funds rate.
C.decrease the real interest rate.
D.decrease government purchases.
E.increase the investment tax credit.
A change in taxes or a change in government transfers affects consumption through a change in:
A.investment demand.
B.the marginal propensity to save.
C.disposable income.
D.autonomous consumption.
E.government spending.
A change in taxes or a change in government transfers affects consumption through a change in:
A.investment demand.
B.the marginal propensity to save.
C.disposable income.
D.autonomous consumption.
E.government spending.
The MPC is equal to the
A.change in consumption expenditure divided by the change in disposable income that brought it about.
B.level of consumption divided by the change in disposable income that brought it about.
C.change in disposable income divided by the change in consumption expenditure.
D.change in consumption expenditure divided by the total disposable income that brought it about.
E.level of consumption expenditure divided by the level of total disposable income that brought it about.
The short-run Phillips curve shows:
A.an inverse relationship between unemployment and inflation.
B.consequences of the misperceptions theory.
C.a direct relationship between unemployment and inflation.
D.an inverse relationship between unemployment and the real interest rate.
E.the optimum level of employment.
A supply shock:
A.Shifts the short-run Phillips curve, but not the short-run aggregate supply curve.
B.shifts the short-run Phillips curve and the short-run aggregate supply curve..
C.Only moves us along the short-run Phillips curve.
D.shifts the short-run aggregate supply curve, but not the short-run Phillips curve.
E.Only moves us along the short-run aggregate supply curve.
The government has a budget surplus if:
A.its total revenues are equal to its total expenditures.
B.its total revenues are greater than its total expenditures.
C.the money supply is less than the money demand.
D.the money supply is less than total expenditures.
E.its total revenues are less than its total expenditures.
When the economy expands, which of the following is true?
A.Income tax receipts will fall but sales tax revenues will rise.
B.Income tax receipts will rise but sales tax revenues will remain the same.
C.Income tax receipts and sales tax revenues will both fall.
D.Income tax receipts will stay the same unless the government changes the tax rates.
E.Income tax receipts and sales tax revenues will both rise.
When the economy expands, which of the following is true?
A.Income tax receipts will fall but sales tax revenues will rise.
B.Income tax receipts will rise but sales tax revenues will remain the same.
C.Income tax receipts and sales tax revenues will both fall.
D.Income tax receipts will stay the same unless the government changes the tax rates.
E.Income tax receipts and sales tax revenues will both rise.
Which of the following statements is false?
A.In typical developing countries, monetary and fiscal policies are controlled by the same central authority.
B.Monetary control is not possible until fiscal policy is under control.
C.In most developed countries, monetary and fiscal policies are conducted by separate, independent agencies.
D.Using money to finance deficits has produced severe deflation in many countries.
E.Fiscal policy can impose an inflationary burden on monetary policy.
The balanced budget multiplier is
A.positive because the magnitude of government expenditure multiplier is larger than the magnitude of tax multiplier.
B.negative because the magnitude of government expenditure multiplier is larger than the magnitude of the tax multiplier.
C.negative because the magnitude of the tax multiplier is larger than the magnitude of the government expenditure multiplier.
D.positive because the magnitude of government expenditure multiplier is smaller than the magnitude of tax multiplier.
E.equal to zero.
Discretionary fiscal policy refers to:
A.changes in taxes to account for externalities and control pollution.
B.changes in government spending or taxes to close a recessionary or inflationary gap.
C.any changes in interest rates.
D.any change in money supply.
E.manipulation of foreign exchange rates.
The basic equation of national income accounting shows: GDP = C + I + G + X – IM. When the government uses fiscal policy to make changes to taxes and transfers, this policy primarily affects:
A.X
B.C
C.G
D.I
E.IM
Contractionary fiscal policy would include:
A.increased money supply.
B.increased government transfers.
C.increased taxes.
D.decreased money supply.
E.increased government purchases.
The short-run Phillips curve shows that in the short run, an increase in the unemployment rate is associated with
A.an increase in the natural unemployment rate.
B.a decrease in the inflation rate.
C.an increase in the inflation rate.
D.a decrease in the expected inflation rate.
E.an increase in the nominal interest rate.
During a recession, unemployment compensation payments increase without the need for any government action. This increase is an example of
A.automatic monetary policy.
B.discretionary monetary policy.
C.automatic fiscal policy.
D.government expenditure but it is not an example of either discretionary or automatic policy.
E.discretionary fiscal policy.
Which of the following is an automatic stabilizer?
A.Military spending on the war in Iraq.
B.Disability payments to the war veterans.
C.Medicare payments to the elderly.
D.Social Security payments to retired workers.
E.Unemployment compensation payment to the unemployed auto workers.
During an expansion, economists generally believe that an economy should:
A.run a budget deficit.
B.balance its budget.
C.see rising levels of unemployment.
D.be able to pay off all of its debt.
E.run a budget surplus.
A share in the ownership of a company held by a shareholder is considered a(n):
A.mortgage.
B.stock.
C.dividend.
D.IOU.
E.bond.
A cut in taxes ________, therefore shifting the aggregate demand curve to the ________.
A.increases corporate profits and investment; left
B.increases disposable income and investment; left
C.decreases the marginal propensity to save and consumption; left
D.decreases government transfers and consumption; right
E.increases disposable income and consumption; right
Stagflation is defined as a period when real GDP ____ and the price level ____.
A.decreases; decreases
B.is constant; rises rapidly
C.decreases; increases
D.increases; decreases
E.increases; increases
According to the AS-AD model
A.changes in the amount of potential GDP is the only factor that shifts both the aggregate supply curve and the aggregate demand curve.
B.the AS curve is always equal to potential GDP.
C.the aggregate quantity supplied is typically greater than the aggregate quantity demanded, thereby leading to unemployment.
D.the equilibrium is where the AS curve crosses the AD curve but the amount of real GDP at this point is not always equal to potential GDP.
E.the aggregate quantity demanded is typically greater than the aggregate quantity supplied, thereby leading to inflation.
The main role of financial systems is to:
A.channel goods and services to the people willing to pay for them.
B.provide credit cards to as many people as possible.
C.make the capitalist class richer.
D.channel funds from savers into investments.
E.increase risk through less diversification of financial investments
The existence of lags:
A.makes both fiscal and monetary policy more effective.
B.makes monetary policy more effective than fiscal policy.
C.makes both fiscal and monetary policy more challenging to implement.
D.makes fiscal policy more effective than monetary policy.
E.makes discretionary fiscal policy more effective than automatic stabilizers.
