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Question 1

Expansionary fiscal policy will be most effective in increasing real gross domestic product when

Answer 1

the aggregate supply curve is horizontal

Question 2

A decrease in which of the following will most likely increase the government’s budget deficit

Answer 2

income taxes

Question 3

Which of the following policies would most likely be recommended in an economy with a low inflation rate and a significantly high unemployment rate?

Answer 3

A decrease in the tax rate on corporate profits and a decrease in the discount rate

Question 4

An expansionary fiscal policy would most likely cause which of the following changes in output and interest rates?

Answer 4

Output Increase

Interest rate increase

Question 5

Which of the following would result in the largest increase in aggregate demand?

Answer 5

A $30 billion increase in military expenditure and a $30 billion open market purchase of government securiti

Question 6

Which of the following will result in an increase in the supply of computers?

Answer 6

An increase in the number of computer manufacturers

Question 7

f exchange rates are allowed to fluctuate freely and the United States demand for Indian rupees increases, which of the following will most likely occur?

Answer 7

The dollar price of Indian goods will increase.

Question 8

An automatic stabilizer is best exemplified by which of the following?

Answer 8

Transfer payments

Question 9

If the exchange rate changes from 1 United States dollar = 100 yen to 1 United States dollar = 80 yen, which of the following will happen

Answer 9

United States exports to Japan will increase.

Question 10

The natural rate of unemployment can be defined as the unemployment rate that exists when the economy

Answer 10

produces at the full-employment output level

Question 11

A fully anticipated expansionary fiscal policy will cause the price level and real output to change in which of the following ways in the long run?

Answer 11

Price level increase

Real output does not change

Question 12

Suppose that the economy is operating at full employment. If the government wants to discourage consumption spending, stimulate investment spending, and maintain full- employment output, which of the following combinations of monetary and fiscal policies would most likely achieve these goals?

Answer 12

Monetary Policy = Increase money supply

Fiscal Policy = Increase personal income taxes

Question 13

Using the same amount of resources, Betaland can produce 80 tons of corn or 80 tons of wheat and Alphaland can produce 40 tons of corn or 20 tons of wheat. Which of the following statements is true?

Answer 13

he opportunity cost of producing a ton of corn in Betaland is a ton of wheat.

Question 14

According to the short-run Phillips curve, which of the following will occur when the Federal Reserve increases the money supply?

Answer 14

The unemployment rate will decrease, and the inflation rate will increase.

Question 15

With a constant money supply, an increase in the demand for money will affect interest rates and bond prices in which of the following ways?

Answer 15

Interest Rate INcrease

Bond Price decrease

Question 16

Which of the following policies will most likely lead to a reduction in the natural rate of unemployment?

Answer 16

Increasing government purchases of goods and services

Question 17

Assume that the market basket is composed of the quantities in year 2010. What is the consumer price index (CPI) in 2018 ?

Answer 17

150

Question 18

An increase in income tax rates with no change in government spending will result in which of the following?

Answer 18

A decrease in private savings

Question 19

Which of the following is true of the long-run Phillips curve?

Answer 19

It is vertical at the natural rate of unemployment.

Question 20

Which of the following will result in an increase in real gross domestic product (GDP) in the short run with no change in the government budget?

Answer 20

An equal increase in both taxes and government spending

Question 21

Human capital refers to which of the following?

Answer 21

The technology available to individual workers

Question 22

Which of the following will lower inflationary expectations

Answer 22

The Federal Reserve’s announcement that it will steadily raise the federal funds rate

Question 23

An increase in national saving will affect the supply of loanable funds and the real interest rate in which of the following ways?

Answer 23

Supply of loanable funds = Increase

Real interest rate= Decrease

Question 24

The real interest rate for a consumer loan is 5 percent, and the expected inflation rate is 2 percent. What is the nominal interest rate on the consumer loan?

Answer 24

7

Question 25

If both the demand for and the supply of coffee increase, what will happen to the equilibrium price and quantity in the coffee market?

Answer 25

Price = indeterminate 
Quantity = Increase

Question 26

Which of the following is true about economic growth?

Answer 26

It is positively related to a country’s investment in human capital.

Question 27

f a country’s consumer price index was 200 last year and is 190 this year, which of the following must be true for the country from last year to this year?

Answer 27

The unemployment rate has decreased by 5 percent

Question 28

If central banks in Asia reduce the supply of their own currencies on the foreign-exchange market relative to the United States dollar, which of the following will occur?

Answer 28

Asian goods will be more expensive for United States consumers.

Question 29

Jamal lost his computer programming job when it was outsourced to a company abroad. After looking unsuccessfully for several months
for another job, he gave up and is currently attending school. Currently Jamal is classified as

Answer 29

not in the labor force

Question 30

Which of the following will decrease gross domestic product by the greatest amount?

Answer 30

A $20 billion decrease in government spending