Term
| A substantial decrease in marginal income tax rates will encourage individuals to |
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Definition
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Term
| Which of the following best expresses the central idea of countercyclical fiscal policy? |
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Definition
| Deficits are planned during economic recessions, and surpluses are utilized to restrain inflationary booms. |
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Term
| Restrictive fiscal policy may have some undesirable consequences. Among these is |
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Definition
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Term
| Which of the following is a problem with discretionary fiscal policy as an economic stabilization tool? |
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Definition
| It is difficult to properly time discretionary changes in fiscal policy. |
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Term
| For an oil-importing country such as the United States, the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be a(n) |
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Definition
| decrease in real output and an increase in the general level of prices. |
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Term
| During 2000-2004, the price of crude oil increased substantially on the world market. Other things constant, how will an unanticipated increase in oil prices influence the general level of prices and real output of oil-importing nations such as the United States and Japan? |
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Definition
| Real output will decrease, and the general level of prices will increase. |
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Term
| How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States? |
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Definition
| Aggregate supply will decrease, leading to a decrease in real GDP. |
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Term
| Which of the following would tend to throw the economy into a recession? |
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Definition
| an unanticipated reduction in aggregate demand due to a sharp reduction in stock prices |
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Term
| Which of the following will be most likely to contribute to the growth of a less-developed country? |
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Definition
| secure property rights and low marginal tax rates |
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Term
| Which of the following would be most likely to improve the standard of living of people in less-developed nations? |
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Definition
| an increase in foreign investment |
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Term
| Which of the following would be most likely to encourage capital formation in a less-developed country? |
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Definition
| the expectation that property rights will be highly secure in the years ahead |
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Term
| The replacement of older products by newer improved ones (causing unemployment in the older product sector while improving employment conditions in the newer sector) is called |
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Definition
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Term
| When an economy is operating at its full employment rate of output, |
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Definition
| the actual rate of unemployment will equal the natural rate. |
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Term
| For the United States, which statement best characterizes the labor force participation rates of men and women over the past three decades? |
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Definition
| The participation rate of women has increased while the participation rate of men has decreased. |
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Term
Number in the labor force
40 million
Number unemployed
2 million
What is the unemployment rate of the economy? |
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Definition
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Term
| Which of the following will most likely increase the natural rate of unemployment? |
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Definition
| an increase in unemployment benefits |
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Term
| Air travel from New York to Los Angeles costs $600 and takes 5 hours. A bus ticket between the cities costs $100 and takes 105 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be |
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Definition
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Term
| Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as |
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Definition
| an outward shift of the curve. |
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Term
| "Total output will be maximized when agricultural products are produced in areas where fertile land is cheap and the climate is temperate and when manufactured goods are produced in areas where raw materials are readily accessible, energy sources are relatively cheap, and skilled labor is readily available." This statement most clearly illustrates |
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Definition
| the potential gains resulting from specialization and the application of the law of comparative advantage. |
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Term
If an economy operates at a point within its production possibilities curve,
Question 20 answers |
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Definition
| it is not efficiently using all of its resources. |
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Term
| When adjusting nominal GDP for price changes, it is preferable to use the GDP deflator rather than the consumer price index because |
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Definition
| the GDP deflator calculates changes in the prices of items that more closely approximate those included in GDP. |
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Term
(I) GDP measures the market value of final goods and services produced in a country during a time period.
(II) An increase in a nation's GDP indicates that the nation's net economic welfare has increased. |
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Definition
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Term
| Gross domestic product is a measure of both |
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Definition
| the market value of the output produced during a period and the cost of producing that output. |
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Term
| If a local shop buys a used motorcycle for $1,000, refurbishes it, and resells it for $2,500, the |
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Definition
| shop contributes value added equal to $1,500, and consequently $1,500 is added to GDP. |
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Term
| In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as |
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Definition
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Term
| A fact based on observable phenomenon that is not influenced by differences in personal opinion is called |
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Definition
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Term
New classical conomic theory suggests that the most effective strategy during a recession is for
the government to do nothing. The most likely reason politicians do not follow this is because |
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Definition
| it would lead to their defeat in the next election. |
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Term
If policymakers cut taxes because they think that recession is a major threat, a proponent of
the new classical view will be most likely to argue that the tax cut is
Question 28 answers |
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Definition
| not very important because the "demand stimulus effects" of lower current taxes will be largely offset by the expectation of higher taxes in the future. |
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Term
| A substantial decrease in marginal income tax rates will encourage individuals to |
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Definition
|
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Term
| If the crowding-out effect is strong, how powerful will the effect of discretionary fiscal policy be? |
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Definition
| Crowding out will make fiscal policy less powerful |
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Term
| Which of the following makes it more difficult for monetary policy makers to time policy changes correctly? |
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Definition
| The primary effects of the policy change will not be felt for 6 to 15 months into the future. |
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Term
| If the Federal Reserve unexpectedly decides to sell bonds, which of the following will most likely happen in the short run? |
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Definition
| The supply of loanable funds will decrease, which will exert upward pressure on the interest rate. |
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Term
| The demand curve for money |
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Definition
| shows the amount of money that households and businesses wish to hold at various rates of interest. |
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Term
| When the Fed unexpectedly decreases the money supply, |
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Definition
| the exchange rate value of the dollar will tend to appreciate. |
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Term
| Suppose the lowest-wage state in the United States is West Virginia and the highest-wage state is New York. Which of the following would be true? |
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Definition
| Both New York and West Virginia will be better off if they are allowed to trade freely. |
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Term
| If the United States imports low-cost goods produced in low-wage countries instead of producing the goods domestically, |
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Definition
| the United States will gain, and U.S. resources will be employed more productively. |
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Term
| Which of the following would most likely cause the current demand for natural gas to decrease? |
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Definition
| a decrease in the price of electricity, a substitute for natural gas |
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Term
| The law of demand indicates that as the price of a good increases, |
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Definition
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Term
(I) Profits direct producers toward activities that increase the value of resources.
(II) Losses impose a penalty on those who reduce the value of resources. |
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Definition
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Term
| Which of the following would lead to an increase in the demand for computer software? |
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Definition
| a decrease in the price of personal computers |
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