Suppose Joey received an additional $7,000 of income and he spends $5,600 of it.His MPC is _____.

Question 1 options:

0.2

0.56

0.8

none of the above

Question 2(1 point)

In general, households with lower wealth tend to have a ____ MPC relative to wealthier households.

Question 2 options:

lower

higher

similar

exactly equivalent

Question 3(1 point)

If the MPC is 0.4, then the expenditure multiplier is _____.

Question 3 options:

1.4

2

2.5

none of the above

Question 4(1 point)

Suppose the MPC is 0.8.If the government increases spending by $10M, then GDP will _____ by _____.

Question 4 options:

increase; $10M

increase; $50M

decrease; $50M

none of the above

Question 5(1 point)

Suppose the MPC is 0.8.If the government decreases taxes by $10M, then GDP will _____ by _____.

Question 5 options:

increase; $8M

increase; $10M

increase; $40M

none of the above

Question 6(1 point)

Expansions are characterized by an unemployment rate _____ the natural rate.

Question 6 options:

greater than

equal to

less than

none of the above

Question 7(1 point)

During recessions, the demand for labor _____ and since wages are sticky, there is _____ for labor.

Question 7 options:

decreases: excess demand

decreases; excess supply

increases; excess demand

increases; excess supply

Question 8(1 point)

Suppose the economy is in long-run equilibrium and wealth increases.In the short-run, real GDP will _____ and the unemployment rate will _____ relative to their initial levels.

Question 8 options:

increase; decrease

decrease; decrease

not change; not change

not change; increase

Question 9(1 point)

Suppose the economy is in long-run equilibrium and wealth increases. In the short-run, the inflation rate will _____ relative to its initial level.

Question 9 options:

increase

decrease

not change

Question 10(1 point)

Suppose the economy is in long-run equilibrium and wealth increases.In the long-run, real GDP will _____ and the unemployment rate will _____ relative to their initial level.

Question 10 options:

decrease; decrease

decrease; increase

not change; not change

not change; increase

Question 11(1 point)

Suppose the economy is in long-run equilibrium and wealth increases. In the long-run, the inflation rate will _____ relative to its initial level.

Question 11 options:

increase

decrease

not change

Question 12(1 point)

Suppose an event occurs that results in a short-run effect of increasing the unemployment rate and increasing the inflation rate in the economy.This will occur as a result of which of the following?

Question 12 options:

Positive demand shock

Negative demand shock

Positive temporary supply shock

Negative temporary supply shock

Question 13(1 point)

Suppose an economy is in long-run equilibrium.Which of the following events will cause a recessionary gap? i. increase in taxes ii. increase in interest rates iii. increase in the expected price level iv. decrease in wealth

Question 13 options:

i only

iii only

i, ii and iv only

all of the above

none of the above

Question 14(1 point)

When the economy is in a recession, optimal fiscal policy to stabilize the business cycle would be to _____.

Question 14 options:

Increase aggregate demand

Decrease aggregate demand

Increase short-run aggregate supply

Decrease short-run aggregate supply

Question 15(1 point)

When the economy is in a recession and the government intervenes to stabilize the business cycle, which one of the following statements is true?

Question 15 options:

In the long-run, the inflation rate will be higher than it would otherwise be.

In the long-run, the inflation rate will be lower than it would otherwise be.

In the long-run, the unemployment rate will be higher than it would otherwise be.

In the long-run, the unemployment rate will be lower than it would otherwise be.

Question 16(1 point)

The process of deciding on and passing fiscal policy legislation creates:

Question 16 options:

an information lag.

a formulation lag.

an implementation lag.

a direction lag.

Question 17(1 point)

Suppose a government spends $500B and has tax revenue of $350B.In this case, the government has a _____.

Question 17 options:

budget deficit

budget surplus

trade deficit

trade surplus

Question 18(1 point)

The total amount of money that a government owes at a point in time is called:

Question 18 options:

a budget deficit.

a budget surplus.

the public debt.

a trade deficit.