Question 17 If in a financial year, a government's expenditure on goods and services amounts to $200 billion, the amount it spent on social security benefits equals $150 billion, and the revenue it collected from taxes is equal to 300 billion, then which of the following statements is true?

A) The government is running a budget surplus.

B) The national debt will remain unaffected.

C) The government will have to borrow money to finance its deficit.

D) The government's revenue equals its expenditure.

E) The government will not have to pay interest on borrowed funds.

Question 18 Which of the following sets of variables will be affected if the government plans to decrease the corporate tax rates?

A) Aggregate demand, aggregate supply, and potential output

B) Aggregate demand, exports, and consumption

C) Aggregate supply, government spending, and interest rates

D) Aggregate supply, total credit, and reserve requirement

E) Aggregate trade, prices, and subsidies

Question 19 Which of the following factors will cause the long-run Phillips curve (LRPC) to move to the right?

A) Decrease in aggregate demand

B) Decrease in recessionary pressures

C) Increase in frictional unemployment

D) Increase in cyclical unemployment

E) Increase in skill level of labor force

Question 20 Assume that the money supply in an economy operating at its full-employment level increases by 4%. Which of the following statements is true in the long run?

A) The real GDP in the economy will increase by 4%.

B) The price level in the economy will decrease by 4%.

C) The real GDP in the economy will remain the same.

D) The price level in the economy will remain the same.

E) The nominal GDP in the economy will increase by 0%.

Question 21 Long-run self-correction of the economy generally shifts ________ , while fiscal and monetary policy solutions focus on shifting ________.

supply; demand

demand; supply aggregate

demand; aggregate supply

aggregate supply; aggregate demand

real interest rates; nominal interest rates

Question 22 If the money supply in an economy is $750 billion, the velocity of money is constant at 3, and the price level is 5, then what will be the country's real output?

A) The nominal GDP is $250 billion.

B) The real GDP is $50 billion.

C) The nominal GDP is $150 billion.

D) The real GDP is $450 billion.

E) The real GDP is $750 billion.

Question 23 Which of the following policies would most likely lead to economic growth?

A) Increasing the income tax rates

B) Increasing the allocation to research and development

C) Decreasing the incentives to producers

D) Decreasing the aggregate federal spending

E) Increasing the interest rates

Question 24 Use the graph to answer the question that follows.

Inflation rate LRPC L O M Y N SRPC Q P Unemployment rate