Which of the following policies would be most likely to lower the inflation rate?

Which of the following negatively affects the government's expenditure on various future obligations?

A. A surplus in the government revenue

B. Inflation in the economy

C. Lags in government policies

D. Interest on borrowed funds

E. Fluctuations in the business cycle

Assume that the money supply in an economy is $250 billion, the price level is 1.25, and the average dollar is spent four times in a year. Based on this data, which of the following must be true?

A. The nominal GDP is $78 billion.

B. The real GDP is $80 billion.

C. The nominal GDP is $313 billion.

D. The nominal GDP is $800 billion.

E. The real GDP is $800 billion.

Which of the following will impede economic growth of a country?

A. Increase in labor force

B. Increased labor force participation rate

C. Decrease in technological development

D. Increase in natural resources

E. Increase in output per labor employed

The sum of government purchases and transfer payments for a given year is $1.2 trillion, while total government revenue was $1 trillion. If in the following year, the government spent more and took in less revenue, which of the following would be true?

A. The deficit would decrease, and the national debt would stay the same.

B. The deficit would decrease, and the national debt would increase.

C. The deficit would increase, and the national debt would decrease.

D. The deficit would stay the same, while the national debt would increase.

E. The deficit and the national debt would both increase.

Which of the following statements explains the effects of crowding out in an economy over the long run?

A. Public investment will increase, and that will increase potential output in the long run.

B. Households will tend to save more money, and that will reduce the supply of loanable funds in the long run.

C. Aggregate demand will increase, and that will increase economic growth in the long run.

D. Capital accumulation will increase, and that will increase aggregate supply in the long run.

E. The stock of physical capital will be reduced, and that will reduce economic growth in the long run.

Which of the following would lead to a rightward shift in the long-run aggregate supply curve?

A. An outward shift in the production possibility curve (PPC) or economic growth

B. An inward shift in the production possibility curve (PPC) or economic growth

C. An outward shift in the production possibility curve (PPC) or an economic depression

D. An inward shift in the production possibility curve (PPC) or an economic depression

E. An inward shift in the production possibility curve (PPC) or economic stagnation

Why is the long-run Phillips curve (LRPC) a vertical line?

A. The LRPC is vertical because it shows the inverse relationship between prices and unemployment.

B. The LRPC is vertical because prices are sticky in the long run.

C. The LRPC is vertical because inflation in an economy cannot be corrected.

D. The LRPC is vertical because the natural rate of unemployment is independent of inflation in the long run.

E. The LRPC is vertical because in the long-run cyclical unemployment persists.

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

Use the graph to answer the question that follows.

Image transcription text

LRPC Inflation Rate X Y T Z T SRPC Unemployment Rate... Show more

If the economy shown in this graph is in a recession and has not yet reached the trough of the business cycle, this would correspond to

A. point X and moving up the curve

B. point X and moving down the curve

C. point Z and moving up the curve

D. point Z and moving down the curve

E. point Y and moving down the curve

Use the graph to answer the question that follows.

Assume that an economy is in equilibrium at point A, as shown in the graph. If the government is running a budget deficit, what will be the new equilibrium in the market of loanable funds for the private sector?

A. The supply of loanable funds will shift to S2, and the new equilibrium will be at point C.

B. The supply of loanable funds will not shift from S1, so the equilibrium will remain at point A.

C. The supply of loanable funds will shift to S1, and the new equilibrium will be at point B.

D. The supply of loanable funds will shift to S2, and the new equilibrium will be at point E.

E. The supply of loanable funds will shift to S1, and the new equilibrium will be at point F.

Use the graph to answer the question that follows.

Image transcription text

Capital Goods Consumer Goods... Show more

The economy experiencing the production possibilities curve change shown in the graph must

A. have an increasing price level

B. have its long-run Phillips curve shifting right

C. have its long-run aggregate supply curve shifting right

D. have cyclical unemployment

E. have an unemployment rate of zero

Use the graph to answer the question that follows.

Which of the following policy actions would lead to the shift shown in the graph?

A. Increasing taxes; open market selling of bonds

B. Decreasing taxes; open market purchasing of bonds

C. Increasing government spending; decreasing interest rate

D. Decreasing taxes; lowering reserve requirement rate

E. Increasing government spending; open market purchasing of bonds

Assume that there is a positive demand shock in the economy caused by an increase in consumer confidence. In the Phillips curve model, this will be reflected by

A. upward movement along the short-run Phillips curve (SRPC)

B. the rightward shift of the long-run Phillips curve (LRPC)

C. the leftward shift of the short-run Phillips curve (SRPC)

D. downward movement along the short-run Phillips curve (SRPC)

E. upward movement along the long-run Phillips curve (LRPC)

What would be the long-run consequence of the government introducing a deregulation policy?

A. A decrease in the short-run aggregate supply

B. A decrease in the long-run aggregate supply

C. An increase in interest rates

D. An increase in tax rates

E. An increase in the long-run aggregate supply

If tax revenues exceed the total of government spending and transfer payments, which of the following must be true?

A. The money multiplier will increase.

B. The government budget is in surplus.

C. The velocity of money will increase.

D. The economy has an inflationary gap.

E. The national debt will increase.

If the money supply in an economy is increased by 5%, the velocity of money is constant, and output is growing at 3%, then

A. the real GDP will increase by 5%

B. the price level will not change

C. the nominal GDP will increase by 3%

D. the price level will increase by 2%

E. the nominal GDP will decrease by 5%

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%.

Which of the following changes will be seen because of a negative supply shock in the economy?

A. The short-run Phillips curve (SRPC) will shift to the left, inflation will increase, and unemployment will decrease.

B. The short-run Phillips curve (SRPC) will shift to the right, and inflation and unemployment will increase.

C. The long-run Phillips curve (LRPC) will shift to the left, inflation will increase, and unemployment will remain the same.

D. The short-run Phillips curve (SRPC) will shift to the right, and both inflation and unemployment will decrease.

E. The long-run Phillips curve (LRPC) will shift to the left, inflation will decrease, and unemployment will remain the same.

How will decreasing government spending and open market sales help reduce inflation in an economy?

A. This will help increase interest rates and decrease shortage in aggregate demand and output in the economy.

B. This will help decrease aggregate demand and output in the economy and lower the price level.

C. This will help decrease interest rates and increase aggregate demand and output in the economy.

D. This will help decrease interest rates, decrease aggregate demand, and increase output in the economy.

E. This will help increase interest rates, increase aggregate demand, and decrease output in the economy.

A combination of expansionary fiscal and monetary policies will ________ output and ________ unemployment in an economy.

A. decrease; increase

B. maintain; decrease

C. increase; decrease

D. increase; maintain

E. decrease; decrease

The table below depicts a closed economy with no international trade of any kind.

Based on this data, which of the following is true?

A. The government is running a balanced budget.

B. The government has savings equal to private investment.

C. The government will have to borrow funds to finance its deficit.

D. The government is supplying funds in the loanable funds market.

E. The government should decrease taxation in the future.

Ceteris paribus, which of the following is true about the aggregate production function?

A. It captures a direct relationship between aggregate employment and aggregate output.

B. It captures a direct relationship only between capital and output produced.

C. The function will change with change in inflation rate.

D. The function will not change with the advent of newer technology.

E. The function remains unchanged if more workers join the labor force, however keeping the unemployment constant.

Use the table to answer the question that follows:

Which is the correct percentage growth in real GDP from 1999 to 2000?

A. 25%

B. 30%

C. 35%

D. 39%

E. 40%

The government of country B has relaxed immigration policies. Which of the following is likely to be a consequence of this policy?

What policies can lower inflation?

What is likely to reduce the rate of inflation?

Which of the following government policies could be used to lower the inflation rate?