ECON 203 Lecture Notes - Lecture 30: Gdp Deflator, Fiscal Multiplier, Fiscal Policy

177 views5 pages

ivoryfox394

7 Apr 2015

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Chapter 4: definition of gdp, gdp expenditure approach income approach, relation between growth rates of real gdp, nominal gdp, and gdp deflator, gross investment vs. net investment. Impact of changes in inventories on gdp, investment, consumption: difference between gdp and gnp, consumer price index. Increase in wages compared to increase in the cpi: labor statistics, calculation of participation rate, employment rate, unemployment rate, types of unemployment, natural unemployment rate in canada. Impact of saving on yp: potential output is vertical, independent of price changes, what affects yp, substitutability of factors of production and impact on yp. Impact on sras and yp from events that result in an increase or a decrease in factors of production. Potential output vs. equilibrium (or actual) output: consequences of ad or sras shifts, output gap calculation, recessionary output gap consequences, why governments intervene to close the output gaps. Factors shifting the ae function business confidence or other autonomous spending decisions.

Related Questions

10,A change in the price levelâ ________ the AE curve andâ ________ the AD curve.

âshifts; shifts

has no effectâ on; results in a movement along

results in a movementâ along; results in a movement along

results in a movementâ along; shifts

âshifts; results in a movement along

17,When the price levelâ falls, the aggregate planned expenditure curve shiftsâ ________, equilibrium expenditureâ ________ and there is a movementâ ________ along the aggregate demand curve.

âupward; increases; upward

âdownward; decreases; downward

âupward; decreases; downward

âupward; increases; downward

âdownward; increases; upward

21,Which of the following increases the size of the expenditureâ multiplier?

an increase in autonomous spending

a decrease in the marginal propensity to consume

a decrease in the marginal propensity to import

an increase in the marginal income tax rate

an increase in investment

23,If the quantity of real GDP demanded is greater than the quantity of real GDPâ supplied, then

the price level falls and firms decrease production.

aggregate demand changes to restore equilibrium.

the economy must be producing at potential GDP.

the price level falls to restore the macroeconomic equilibrium

the price level rises and firms increase production.

24, ________ can trigger an expansion.

Equality between aggregate expenditure and real GDP

A decrease in induced expenditure

A downward shift of the AE line

An increase in autonomous expenditure

A decrease in autonomous expenditure

greyarmadillo136

1.
John just bought shares of stock in IBM for $10,000 and paid a $90commission to his broker. How did this affect GDP?
A) It had no impact on GDP.
B) GDP increased by $90.
C) GDP increased by $10,000.
D) GDP increased by $9,990.
E) GDP increased by $10,090.
2.
Opportunity cost is the ____ alternative forfeited when a choice ismade.
A) least-valued
B) most highly-valued
C) most convenient
D) most recently considered
3.
If there is an increase in the amount of good B foregone as everyadditional unit of good A is produced, the PPF between A and Bwould
A) be a straight line.
B) be a bowed-outward curve.
C) be a bowed-inward curve.
D) not exist.
4.
Persons who are retired or engaged in own-home housework areconsidered to be in which of the following categories?
A) in the civilian labor force
B) not in the labor force
C) employed
D) unemployed
5.
A recessionary gap exists if (actual) Real GDP is ____ Natural RealGDP.
A) less than
B) greater than
C) equal to
D) b and c
E) none of the above
6.
Decision making "at the margin" means making a choice based on ____of a decision.
A) the total benefits
B) the total costs
C) comparing the total benefits and costs
D) comparing the additional benefits and costs
7.
When Claudia trades $100 for good X, economists assume that sheis
A) trading something of less value to her for something of morevalue to her.
B) trading something of more value to her for something of lessvalue to her.
C) trading something that gives her less utility for something thatgives her more utility.
D) a and c
E) none of the above
8.
An increase in investment at a given price level
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) causes an upward movement along the existing AD curve.
D) causes a downward movement along the existing AD curve.
E) none of the above
9.
If the demand for a good falls by less than the supply of the goodrises, then equilibrium price will ____ and equilibrium quantitywill ____.
A) rise; fall
B) rise; rise
C) fall; fall
D) fall; rise
10.
The CPI was 140 in one year and 144 the following year.Approximately how much did prices rise between the two years?
A) 2.86 percent
B) 2.78 percent
C) 0.03 percent
D) 1.03 percent
E) none of the above
11.
The expenditure approach to measuring GDP sums
A) consumption, investment, government purchases, and netexports.
B) sales, revenues, income, and wages.
C) profits, compensation of employees, consumption, andinvestment.
D) net exports, consumption, wages, and salaries.
12.
Which of the following would not be included in the calculation ofthis year's GDP?
A) a headlight bulb purchased at Joe's Auto Supply by Susan toreplace a burnt out bulb in her car
B) a headlight bulb purchased by Ford Motor Co. from asupplier
C) a headlight bulb produced but not sold this year and thus endingup as inventory
D) none of the above, i.e., all would be included
13.
Suppose the government decides that every family should own its ownhome. To bring this about, the government decides to subsidize thehome-construction industry by giving the home-constructioncompanies $10,000 for every house that they build. As a result ofthis,
A) the supply curve of new houses would shift leftward, since itnow costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward, since nowevery family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward, sincebuilders would be willing to produce and sell more houses at eachgiven price.
E) c and d
14.
Which set of changes will raise demand?
A) an increase in income (assuming demand is for a normal good), adecline in wage rates, and a rise in the per-unit tax placed on theproduction of a good
B) an increase in the number of buyers, a decline in the price of asubstitute, and an increase in the prices of relevantresources
C) an increase in the price of a substitute, a decrease in theprice of a complement, and an increase in expected (future)price
D) a decline in the number of buyers, an increase in the price of acomplement, and a decline in a per-unit tax placed on theproduction of a good
E) none of the above
15.
Both country 1 and country 2 are located on their respectiveproduction possibilities frontiers (PPFs), but country 1 producestwice the output that country 2 produces. It follows that
A) country 1's PPF lies further to the right than country 2'sPPF.
B) country 1 has a smaller population than country 2.
C) country 1 has a bigger population than country 2.
D) country 1 is efficient and country 2 is inefficient.
E) none of the above
16.
Suppose aggregate demand is too low to bring about the Natural RealGDP level. A Keynesian policy prescription would call for a(n) ____to close this recessionary gap.
A) increase in government spending
B) decrease in government spending
C) increase in taxes
D) decrease in taxes
E) a or d
17.
The structural unemployment rate is 3.1 percent, the frictionalunemployment rate is 2.1 percent, and the current unemployment rateis 4.9 percent. The economy is in
A) a recessionary gap producing less than Natural Real GDP.
B) an inflationary gap producing more than Natural Real GDP.
C) long-run equilibrium.
D) an inflationary gap producing Natural Real GDP.
E) a recessionary gap producing more than Natural Real GDP.
18.
A fall in the price level changes the purchasing power of money.This is relevant to the ____ effect.
A) international trade
B) real balance
C) aggregate demand
D) interest rate
E) aggregate supply
19.
An economic policy initiative results in the AD curve shifting tothe right. As a result,
A) the price level will rise.
B) the price level will stay constant.
C) the price level will fall.
D) Real GDP will rise in the short run.
E) a and d
20.
Which of the following is consistent with the classical position onwages and prices?
A) Wages and prices are sticky in the downward direction.
B) Wages are sticky in the downward direction, but prices areflexible.
C) Wages and prices are flexible.
D) Prices are sticky in the downward direction, but wages areflexible.
21.
If the bottom half of all U.S. income tax payers were allowed tostop paying the income tax entirely and the top 50% continued topay as they do now, tax revenues to the government would drop byabout
A) 3.6 percent.
B) 10.2 percent.
C) 13.9 percent.
D) 33.3 percent.
22.
Which of the following is most nearly consistent with Say'slaw?
A) When a person produces one good, he or she plans to demand othergoods.
B) When a person produces a good, he or she plans to sell it.
C) When a person buys a good, he or she plans to pay for it withmoney.
D) When a person goes to work, he or she plans to produce.
23.
The economy was at point A producing 100X and 200Y. It moved topoint B where it produces 200X and 300Y. It follows that
A) point A may have been a point below the economy's PPF, whilepoint B may lie on the PPF.
B) the economy's PPF could have shifted outward and point A was apoint on the economy's old PPF.
C) the economy has moved from one point on its PPF to another pointon the same PPF.
D) a or b
E) a or c
24.
The condition in an economy that makes a "rationing device" anecessity is the fact that
A) the economy is organized around free markets.
B) the economy is centrally planned by the government.
C) scarcity exists.
D) there are fewer types of goods than there are people in theeconomy.
25.
Expansionary fiscal policy actions include ____ government spendingand/or ____ taxes, while contractionary fiscal policy actionsinclude ____ government spending and/or ____ taxes.
A) increasing; increasing; decreasing; decreasing
B) decreasing; decreasing; increasing; increasing
C) increasing; decreasing; increasing; decreasing
D) decreasing; increasing; increasing; decreasing
E) increasing; decreasing; decreasing; increasing
26.
A price ceiling is a government-mandated
A) minimum price below which legal trades cannot be made.
B) maximum price above which legal trades cannot be made.
C) minimum price above which legal trades cannot be made.
D) maximum price below which legal trades cannot be made.
27.
In year 1 the CPI is 144.1, and in year 2 the CPI is 151. IfSarah's salary was $33,500 in year 1, what salary in year 2 wouldcause her to exactly "keep up with inflation"?
A) $50,585
B) $48,274
C) $40,508
D) $35,104
28.
One measure of the inflation rate is the
A) sum of the CPIs of adjacent years.
B) percentage change in the CPI of adjacent years.
C) percentage change in the Real GDP of adjacent years.
D) GDP minus the Real GDP in a year.
29.
Expansionary fiscal policy is ineffective if
A) there are idle resources in the economy.
B) the MPC is less than 0.60.
C) the government has a budget surplus.
D) there is complete crowding out.
E) a and d
30.
Suppose the economy goes from a point on its unchanging PPF to apoint down and to the left of it. This could be due to
A) a gain of resources.
B) a loss of resources.
C) technological improvement in the production of both goods.
D) a new law that interferes with economic efficiency.
31.
A decrease in the price of electricity will cause
A) a movement down the SRAS curve.
B) a movement up the SRAS curve.
C) a leftward shift in the SRAS curve.
D) a rightward shift in the SRAS curve.
E) no change regarding the SRAS curve
32.
Which of the following is an example of crowding out?
A) A decrease in the rate of growth of the stock of money decreasesGDP.
B) A deficit causes an increase in interest rates, which causes adecrease in investment spending.
C) An increase in tariffs causes a decrease in imports.
D) A decrease in government housing subsidies causes an increase inprivate spending on housing.
33.
A rightward shift in the demand curve for tennis balls could becaused by
A) a fall in the price of tennis balls.
B) a fall in the price of tennis rackets.
C) a rise in the price of tennis lessons.
D) a fall in income, assuming tennis balls are a normal good.
34.
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80,then we know that
A) as Yd rises by $1, Co rises by $0.80.
B) as Yd rises by $1, C rises by $0.80.
C) Yd rises by $0.80.
D) as C0 rises by $0.80, Yd rises by $1.
35.
Suppose a drop in stock prices makes people feel less wealthy. Thiswould cause ____ the economy's AD curve.
A) movement down along
B) movement up along
C) a rightward shift of
D) a leftward shift of
36.
An economy is producing its Natural Real GDP when the rate ofunemployment is equal to the ____ unemployment rate.
A) frictional
B) structural
C) sum of the frictional unemployment rate and the structural
D) seasonal
E) cyclical
37.
Who would be most likely to agree that "People do not always savemore as interest rates rise"?
A) a classical economist
B) John Maynard Keynes
C) an efficiency wage theorist
D) a and b
E) a, b, and c
38.
The U.S. income tax is currently a ____ tax.
A) progressive
B) proportional
C) regressive
D) proactive
39.
The question of U.S. budget deficits and their impact on the U.S.economy is dealt with in the study of
A) microeconomics.
B) managerial economics.
C) macroeconomics.
D) consumer economics.
40.
John Maynard Keynes believed that wages may be inflexible in thedownward direction. Consequently, an economy
A) could get stuck in long-run equilibrium.
B) could get stuck in a recessionary gap.
C) could get stuck in an inflationary gap.
D) would always produce more than Natural Real GDP.
E) b and c

lilacbear730

Question 1

The law of demand states that there is a direct relationship between supply and demand.

True

False

4 points

Question 2

Equilibrium is a state of balance between supply and demand.

True

False

4 points

Question 3

Goods are scarce for both rich and poor.

True

False

4 points

Question 4

"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.

True

False

4 points

Question 5

The law of supply states that there is a direct relationship between price and quantity demanded.

True

False

4 points

Question 6

In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.

True

False

4 points

Question 7

Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.

True

False

4 points

Question 8

Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.

True

False

4 points

Question 9

Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.

True

False

4 points

Question 10

Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.

True

False

4 points

Question 11

Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".

True

False

4 points

Question 12

The production possibilities frontier assumes that the level of technologyvaries when applying the model.

True

False

4 points

Question 13

Excess demand in the market will cause the price of a product to decline.

True

False

4 points

Question 14

Demand is measured on the vertical axis and supply on the horizontalaxis.

True

False

4 points

Question 15

A change in quantity demanded is a movement along the same demandcurve.

True

False

4 points

Question 16

As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.

True

False

4 points

Question 17

Which growth theory compares a subsistence real wage rate to the actual real wage rate?

		Classical growth theory
		Inflation growth theory
		Neoclassical growth theory
		New growth theory

4 points

Question 18

Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.

		unemployment rate; 25/100 Ã 100
		employment rate; 25/75 Ã 100
		labor force; 75
		labor force; 25/100 Ã 100

4 points

Question 19

Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:

		increases.
		decreases.
		does not change because there is no change in the money wage rate.
		increases only if the price level also decreases.

4 points

Question 20

GDP can be computed as the sum of:

		all sales that have taken place in an economy over a period of time.
		the total expenditures of consumers and business over a period of time.
		the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time.
		the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.

4 points

Question 21

The real wage rate equals:

		(100 x (money wage rate/price level)
		(100 x (price level/money wage rate)
		(money wage rate x (price level)
		(money wage + (number of hours worked/(price level)

4 points

Question 22

If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:

		10.2 percent.
		13.8 percent.
		12.2 percent.
		16.8 percent.

4 points

Question 23

A movement along the production function is the result of a change in:

		the quantity of labor.
		technology.
		capital.
		interest rates.

4 points

Question 24

All of the following are part of fiscal policy EXCEPT:

		setting tax rates.
		setting government spending.
		choosing the size of the government deficit.
		controlling the money supply.

4 points

Question 25

Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:

		decreases.
		increases.
		stays the same.
		could increase, decrease or stay the same.

lavenderminnow570

ECON 203 Lecture Notes - Lecture 30: Gdp Deflator, Fiscal Multiplier, Fiscal Policy

Document Summary

Get access

Related Documents

ECON 203 Study Guide - Final Guide: Tax Rate, Gdp Deflator, Output Gap

ECON 203 Study Guide - Midterm Guide: Tax Rate, Government Budget Balance, Toner

ECON 203 Lecture Notes - Lecture 7: Gdp Deflator, Glossary Of Partner Dance Terms, Output Gap

Related Questions