MGEC31H3 Study Guide - Deadweight Loss, Tax Efficiency, Intergenerational Equity
Document Summary
Get access
Related Questions
Question 1
Which of the following describes the relationship between the change in inventories and aggregate expenditure?
A. | Aggregate expenditure equals the change in inventories minus GDP. |
B. | The change in inventories equals GDP divided by aggregate expenditures. |
C. | Aggregate expenditures equals GDP divided by the change in inventories. |
D. | Aggregate expenditures equals GDP minus the change in inventories. |
E. | The change in inventories equals GDP multiplied by aggregate expenditure. |
1 points
Question 2
Suppose the marginal propensity to consume is 0.80 and taxes decrease by $10 billion. Which of the following is true?
A. | Disposable income and consumption fall by $10 billion |
B. | Disposable income and consumption rise by $10 billion |
C. | Disposable income rises by $10 billion and consumption rises by $8 billion |
D. | Disposable income falls by $10 billion and consumption falls by $8 billion |
E. | Disposable income rises by $10 billion and consumption falls by $8 billion |
1 points
Question 3
If aggregate expenditure at a particular level of income is less than output,
A. | output will increase |
B. | output will decrease |
C. | output will remain the same |
D. | output will rise slightly and then level off |
E. | we cannot determine what will happen to output |
1 points
Question 4
The consumption function
A. | illustrates the relationship between real disposable income and real consumption spending |
B. | illustrates the relationship between the price level and real consumption spending |
C. | is the relationship between productivity and real consumption spending |
D. | shows how real consumption increases when real disposable income decreases |
E. | illustrates the relationship between real consumption spending and employment |
1 points
Question 5
The focus of the short-run macro model is on the role of
A. | spending in explaining economic fluctuations |
B. | labor in explaining economic fluctuations |
C. | financial markets in explaining economic fluctuations |
D. | output in explaining economic fluctuations |
E. | resources in explaining economic fluctuations. |
1 points
Question 6
If the output level is such that the aggregate expenditure line lies below the 45-degree line, which of the following is true?
A. | Aggregate expenditure is greater than output, so inventories will increase and output will be raised. |
B. | Aggregate expenditure is greater than output, so inventories will decrease and output will be increased. |
C. | Aggregate expenditure is less than output, so inventories will decrease and output will be raised. |
D. | Aggregate expenditure is less than output, so inventories will increase and output will be lowered. |
E. | Aggregate expenditure is greater than output, so inventories will increase and output will be lowered. |
1 points
Question 7
If the marginal propensity to consume is 0.7, the expenditure multiplier is
A. | 7.0 |
B. | 0.7 |
C. | 3.0 |
D. | 3.3 |
E. | not determinable without additional information. |
1 points
Question 8
Aggregate expenditure is the sum of
A. | all types of spending by households and firms |
B. | spending and savings by households |
C. | spending by households and governments on final goods and services |
D. | spending by households, government, firms, and foreigners on final goods and services |
E. | all spending and saving by households, firms, and governments |
1 points
Question 9
If the marginal propensity to consume is 0.5 and disposable income increases by $10,000, by how much will consumption spending increase?
A. | $10,000 |
B. | $500 |
C. | $50 |
D. | $5,000 |
E. | $9,524 |
1 points
Question 10
When real consumption expenditure is plotted against real disposable income the resulting relationship is
A. | very weak. |
B. | virtually flat . |
C. | positive and very close to linear. |
D. | negative and very close to linear. |
QUESTION 5
Which of the following statements has been proposed as a benefit of passive policy making?
Passive policy making utilizes the rational expectations hypothesis. | ||
Passive policy making allows for making immediate changes in response to an anticipated change in economic performance. | ||
When using passive policy making there is no tradeoff between price stability and unemployment. | ||
Passive policy making does not wait for the time lag between recognition of a problem and policy action before engaging in economic policies to stabilize the economy. |
1.47 points
QUESTION 6
The idea of policy making taking place in response to a predetermined set of rules is referred to as
discretionary policy making. | ||
passive policy making. | ||
Keynesianism. | ||
active policy making. |
1.47 points
QUESTION 7
What types of unemployment will still exist when the economy is at the natural rate of unemployment?
frictional and cyclical unemployment only | ||
frictional, structural, and cyclical unemployment | ||
frictional and structural unemployment only | ||
structural and cyclical unemployment only |
1.47 points
QUESTION 8
The natural rate of unemployment is
the unemployment rate that exists in long-run equilibrium, after adjustments to all changes have occurred. | ||
the unemployment rate when there is no structural unemployment. | ||
the unemployment rate when there is no structural or cyclical unemployment. | ||
zero. |
1.47 points
QUESTION 9
According to the text, minimum-wage laws cause increases in
employment possibilities. | ||
structural unemployment. | ||
poverty. | ||
productivity. |
1.47 points
QUESTION 10
During a recession, the overall unemployment rate
exceeds the natural rate of unemployment. | ||
falls below the natural rate of unemployment. | ||
falls rapidly. | ||
equals the inflation rate. |
1.47 points
QUESTION 11
Cyclical unemployment is
the unemployment due to the unemployment benefits and welfare programs of the government. | ||
the unemployment due to union activities and government-imposed restrictions to entry into specific occupations. | ||
the difference between the actual unemployment rate and the natural rate of unemployment. | ||
the difference between the unemployment rate when the economy is in a recession and the unemployment rate when the economy is at the peak of an expansion. |
1.47 points
QUESTION 12
Which of the following unemployment rates can be negative?
the natural unemployment rate | ||
the seasonal unemployment rate | ||
the official unemployment rate reported by the Bureau of Labor Statistics | ||
the cyclical unemployment rate |
1.47 points
QUESTION 13
An unexpected increase in aggregate demand typically causes
the price level to increase but has no effect on the unemployment rate. | ||
frictional unemployment to increase but structural unemployment to decrease. | ||
the price level to increase and the unemployment rate to fall. | ||
the price level to increase and the unemployment rate to increase. |
1.47 points
QUESTION 14
The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is known as the
non-accelerating-inflation rate of unemployment (NAIRU). | ||
contrary rate of unemployment. | ||
Phillips rate of unemployment. | ||
menu cost rate of unemployment. |
1.47 points
QUESTION 15
Based on the work of economist A.W. Phillips, economists concluded that
high inflation rates are associated with low unemployment rates. | ||
higher rates of inflation are associated with higher rates of unemployment. | ||
there is no trade-off between inflation and unemployment. | ||
unemployment can be effectively combated by raising wages. |