Macroecocomics Flashcards
(40 cards)
Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $23 million, what unplanned changes in inventories occurred?
There was an unplanned decrease in inventories equal to $2 million.
An example of assets that are included in ________ would be stocks, bonds, and savings accounts
household wealth
Consumer spending ________ and investment spending ________.
follows a smooth trend; is more volatile and subject to fluctuations
If the MPC is 0.95, then a $10 million increase in disposable income will
increase consumption by $9.5 million.
During a(n) ________ many firms experience increased profits, which increases ________ and investment spending.
expansion; cash flow
According to the “wealth effect,” when the ________ falls, the ________ rises.
price level; the real value of household wealth
Suppose the U.S. GDP growth rate is slower relative to other countries’ GDP growth rates. This will
shift the aggregate demand curve to the right.
What is potential GDP?
the level of real GDP in the long run
Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy. As a result,
the long run aggregate supply curve will shift to the right.
In 2005, Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico which subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once the refining capacity was restored, these prices came back down. The restoration of refining capacity should
shift the short-run aggregate supply curve to the right.
Which of the following would be classified as fiscal policy?
The federal government cuts taxes to stimulate the economy.
The increase in the amount the government collects in taxes when the economy expands and the decrease in the amount the government collects in taxes when the economy goes into a recession is an example of
automatic stabilizers.
Refer to the figure. Suppose the economy is in short-run equilibrium above potential GDP and automatic stabilizers move the economy back to long-run equilibrium. Using the basic ADAS model in the figure, this would be depicted as a movement from
C to B.
To combat a recession with discretionary fiscal policy, Congress and the president should
decrease taxes to increase consumer disposable income.
If the economy is growing beyond potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to longrun aggregate supply? An increase in
taxes
In the long run, most economists agree that a permanent increase in government spending leads to ________ crowding out of private spending.
complete
Fiscal policy actions that are intended to have longrun effects on real GDP attempt to increase ________ through changing ________.
aggregate supply; taxes
To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the
budget deficit or surplus as a percentage of GDP.
What is meant by supply-side economics?
Supply-side economics refers to the use of taxes to increase incentives to work, save, invest, and start a business in order to increase long-run aggregate supply.
An increase in Social Security payments will
increase consumption spending.
The long-run aggregate supply curve will shift to the right if the economy
experiences technological change.
Workers expect inflation to rise from 3% to 5% next year. As a result this should
shift the short run aggregate supply curve to the left.
Which of the following would be classified as fiscal policy?
The federal government cuts taxes to stimulate the economy.
Which of the following would not be considered an automatic stabilizer?
legislation increasing funding for job retraining passed during a recession
