Econ 214 exam 2

Econ 214 Exam 2

1. Which of the following will most likely occur in the US as the result of an unexpected rapid growth--- an increase in aggregate demand and output in the short run

2. Within the AD/AS model, if consumers increase their savings and cut back on their spending, the real interest rate will decrease and thereby cushion the reduction in consumption spending

3. In the economy were operating at a point in figure 10-9 resource prices would tend to – increase and move the economy toward point c

4. During the 1990s a financial crisis spread throughout Asia causing those economies to drop into recession—both real output and the price level would have fallen.

5. Which of the following is most likely to accompany an unanticipated increase in short-run aggregate supply.- an increase in real GDP

6. At which point in figure 10-2 is the economy at long-run equilibrium- F

7. If improvements in education and training programs increased the productivity of persons in the labor force—both short-run and long-run aggragte supply

8. The short-run effect of a sudden increase in stock prices will be – an increase in both output prices

9. Which of the following statements is most consistent with the view that the economy has a self-corrective- when the economy is in a recession, falling resource prices and declioning interest rate

10. If the economy is simultaneously in long-run and short-run equilibrium which of the following is true? Aggregate quantity demanded is equal to potential output

11. Within the framework of the Keynesian model, which of the following would most likely occur if the federal government increased its spending--- the rate of inflation would rise

12. According to Keynesian view, if an economy was operating at long-run equilibrium, an increase in government expenditures would—be inflationary

13. Keynesian analysis indicates that an unexpected decline in aggregate demand will lead to- an increase in inventories and a reduction in output

14. If policy makers believe that an inflationary boom is about to begin, the Keynesian view indicates that they—decrease government spending and/or raise taces

15. The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government—economic recessions

16. A major advantage of built in or automatic stabilizers is that they- required no congressional action to be effective.

17. Within the framework of the Keynesian model, if spending is abnormally low- equilibrium output will be less than the full-employment rate of output

18. When the unemployment rate is low, the impact of additional spending on real output will be smaller than when the unemployment rate is high

19. Unemployment compensation payments rise during a recession and thereby help stimulate consumption

20. Suppose long-run equilibrium is present and the government budget is in balance. Which of the following—a budget deficit

21. The crowding out effect refers to the tendency of – the additional borrowing accompanying larger budget deficits to increase interest rates

22. Reductions in personal income tax rates that increase supply and work effort, can be expected to also increase consumption spending

23. If a reduction in government borrowing leads to lower real interest rates in the US--- the dollar will depreciate in the foreign exchange market.

24. If heavy federal borrowing pushes up real interest rates in the Us, which of the following will most likely result? – an inflow of capital and an appreciation in the foreign exchange value of the dollar

25. Which of the following tends to make the size of a shift in aggregate demand resulting from a tax change smaller than would otherwise be the case—the crowding-out effect

26. If the output of the economy is y1 which of the following would a new classical economy—continuation of the current tax and expenditure policies

27. Keynesian critics would aruge that expansion in government debt during a recession would lead to – higher failure interest payments and tax rates

28. Politicians often instruct households to spend in order to help the economy.. this advice overlooks the fact that—you cannot have strong economy if all or most household are spending just about

29. The new classical model implies that a shift to a more expansionary fiscal policy will – exert little or no impact on the real interest rate, aggregate demand and employment

30. Supply –side economies stresses that marginal tax rates exert important incentive effects that influence real output

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