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The Industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:
capital goods and durable consumer goods
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A recession is a period in which:
real domestic output falls.
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The immediate determinant of the volume of output and
employment is the:
level of total spending.
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the immediate cause of most business cycle variation is:
an unexpected change in the level of total spending.
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the natural rate of unemployment is
that rate of unemployment occuring when the economy is at its potential output.
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the natural rate of unemploment is the
full-employment unemployment rate
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kyle is temporarily unemployed because kyle has voluntarily quit his job with company A and will begin a better job next weel with company B. Kyle will be considered as
frictionally unemployed
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the official unemployment rate:
is the percentage of the labor force that is unemployed
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cyclical unemplyment results from
deficiency of spending on goods and services
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structural unemployment
may involve a locational mismatch between unemployed workers and job openings.
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the US unemployment rate is 9 percent, we can infer that:
potential GDP is in excess of actual GDP.
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Okun's law:
shows the relationship between the unemployment rate and the size of the negative GDp gap.
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Demand-pull inflation:
occurs when total spending in the economy is excessive.
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"too much money chasing too few goods" best describes
demand-pull inflation
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inflation initiated by increases in wages or other resource prices is labeled:
cost-push inflation
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rising per-unit production costs are mostly directly associated with:
cost-push inflation.
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unanticipated inflation:
reduces the real burden of the public debt to the federal government
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the most important determinant of consumer spending is:
the level of income.
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the MPC can be defined as that fraction of a:
change in income that is spent.
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the 45-degree line on a graph relating comsumption and income shows:
all the points at which consumption and income are equal.
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the consumption schedule shows:
a direct relationship between aggregate comsumption and aggregate income.
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which of the following is correct?
APC + APS = 1.
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as disposable income increases, consumption:
and saving both increase
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which of the following is correct?
MPC + MPS = APC + APS
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if a consumption schedule shifts upward, this necessarily means that the:
APC is now higher at each level of disposable income.
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other things equal, a decrease in the real interest rate will:
move the economy downward along its existing investment demand curve.
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the investment demand curve suggests
there is an inverse relationship between the real rate of interest and the level of investment spending.
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if the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will b e forthcoming when:
r is greater than i.
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the real interest rate is:
the percentage increase in purchasing power that the lender recieves on a loan.
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the aggregate demand curve is the relationship between the:
price level and purchasing of real domestic output.
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the aggregate demand curve shows the:
inverse relationship between the price level and real GDP purchased.
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which effect best explains the downward slope of the aggregate demand curve:
A real -balances effect.
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other things being equal, the higher the price level, the lower the level of domestic output purchased. this occurs because of:
the real-balances effect.
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when the price level falls:
holders of financial assets with fixed money values increase their spending.
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which of the following would lead to an increase in aggregate demand:
an increase in national incomes abroad.
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Which would most likely increase aggregate supply?
an increase in productivity.
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menu costs will:
make prices inflexible downward.
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when the federal government uses taxation and spending actions to stimulate the economy it is conducting:
Fiscal Policy.
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when changes to taxes and spending occur in the economy without explicit action by the federal government, such policy is:
nondiscretionary.
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which group has direct responsibility for providing analysis, advice, and assistance to the US president on economic maters?
the Council of Economic Advisors.
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the set of fiscal policies that would be most contradictionary would be a:
decrease in government spending and increase in taxes
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in an aggregate demand and aggregate supply graph, a contradictionary fiscal policy can be illustrated by a:
leftward shift in the aggregate deamnd curve
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if congress passes legislation to to cut taxes and increase government spending to counter the effects of a severe recession, this would be an example of an:
expansionary fiscal policy.
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when governemnt tax revenues change automatically an in a countercyclical direction over the course of the business cycle, this is an example of:
built-in stability
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the time wich elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic is referred to as a:
recognition lag
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one of the timing problems with fiscal policy is an "operational lag" that occurs between the:
time that fiscal action is taken and the time that action has an impact on output, employment, and the price level.
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crowding-out is the notion that:
deficit financing will increase the demand for money, increase the interest rate, and reduce level of investment spending in the economy.
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the crowding-out effect suggests that:
increases in government spending may raise the interest rate and thereby reduce investment
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the crowding-out effect works through interest rates to:
decrease the effectiveness of expansionary fiscal policy.
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a federal budget deficit exists when:
federal government spending exceeds tax revenues.
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a budget surplus means that:
governemnt revenues are greater than expenditures in a given year.
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the functions of money are to serve as a:
unit of account, store of value, and medium of exchange
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what function is money serving when you take it on a trip and keep it in yur wallet in case you need it?
a store of value
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if product prices were stated in terms of gallons of milk, then milk would be functioning primarily as:
a unit of account
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the largest component of the money supply (M1) is:
Currency
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one reason that "near monies" are important is because:
they can be easily converted into money or vice-versa, and thereby, and therefore can influence the stability of the economy.
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what "bacls" the money supply?
the US governments ability to keep the value of money relatively stable.
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the use of a credit card is most similar to:
obtaining a short-term loan from a financial institution
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the fractional reserve system of banking started when goldsmiths began:
issuing paper recipts in excess of the amount of gold held
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which are liabilities to a bank?
capital stock and demand deposits
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a commercial bank has actual reserves of $50,000 and checkable deposits of $200,000, and the required reserve ratio is 20%. the excess reserves of the bank are:
$10,000
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suppose a commercial banking system has $240,000 of oustanding checkable deposits and actual reserves of $85,000. if the reserve ratio is 25 percent, the banking system can expand the supply of money by a maximum of:
$100,000
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the transactions demand for money will shift to the:
left when nominal GDP decreases.
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a consumer holds money to meet spending needs, this would be an example of the:
transactions demand for money
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the asset demand for money and the rate of interest are:
inversely related
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there is an asset demand for money primarily because of which function of money?
store of value.
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an increase in nominal GDP will:
increase the transactions demand and and total demand for money.
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which one of the following is a tool of monetary policy for altering the reserves of commercial banks?
open-market operations
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which of the following is to be a tool of monetary policy for altering the reserves of commercial banks?
discount rate
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suppose the economy is at full employment with a high inflation rate. Which combination of government policies is most likely to reduce the inflation rate?
sell government securities in the open market and and decrease government spending
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suppose the economy is at full employment with a high inflation rate.
Which combination of government policies is least likely to reduce the
inflation rate?
buy governement securities in the open market and decrease taxes
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the economy is experiencing fluctuation and the federal reserve decides to persue a restrictive money policy. which actions by the fed would be most consistent with this policy?
selling government securities.
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changes in the rate of interest will most likely affect:
investment spending.
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