hw #3 macro

Which of the following is true of inflation? a. It is an increase in the general price level of goods and services. b. The purchasing power of money increases as the result of inflation. c. Inflation is similar to interest payments on future money income, such as pensions and receipts from outstanding loans. d. Inflation has no effect on real income.

Inflation is an increase in: a. prices of all products in the economy. b. homes, autos and basic resources. c. the general price level of products. d. none of these.

Which of the following is the largest single component of the market basket used to compute the consumer price index (CPI)? a.Food and beverages. b. Housing. c. Transportation. d. Medical care

Which of the following statements is true? a. Deflation is an increase in the general level of prices. b. The consumer price index (CPI) measures changes in the average prices of consumer goods and services. c. Disinflation is an increase in the rate of inflation. d. Real income is the actual number of dollars received over a period of time. e. The real interest rate equals the nominal rate of interest plus the inflation rate.

If the consumer price index in Year 1 was 200 and the CPI for Year 2 was 230, the rate of inflation was: a. 15 percent. b. 7.5 percent. c. 30 percent. d. 230 percent.

Which of the following would understate the consumer price index? a. Substitution bias. b. Deteriorating quality of products. c. Improving quality of products. d. Law of demand bias.

The substitution bias is believed to cause the consumer price index to: a. overstate the true rate of inflation. b. understate the true rate of inflation. c. understate the true GDP deflator. d. none of these.

Classical economists believed that: a. price flexibility automatically directs market economies to full employment. b. budget deficits and surpluses were necessary for the control of economic fluctuations. c. market economies suffer prolonged periods of recessions and depressions. d. market economies are inherently unstable because of fluctuating aggregate demand.

Prior to the Great Depression, classical economists believed that a recessionary downturn would be reversed by: a. higher wages and prices. b. lower wages and prices. c. an expansionary monetary policy on the part of the Federal Reserve System. d. an increase in government spending that would stimulate aggregate demand.

The popular theory prior to the Great Depression that the economy will automatically adjust to achieve full employment in the long run is: a. supply-side economics. b. Keynesian economics. c. classical economics. d. mercantilism

The French economist Jean-Baptiste Say transformed the equality of total output and total spending into a law that can be expressed as follows a. Unemployment is not possible in the short run. b. Demand and supply are never equal. c. Supply creates its own demand. d. Demand creates its own supply.

The marginal propensity to consume (MPC) is the change in consumption divided by the change in disposable personal income. a. True b. False

Real investment spending for the past 35 years is less volatile than real personal consumption. a. True b. False

If people become pessimistic about the state of the economy, the consumption function shifts downward. a. True b. False

Stagflation means a simultaneous decrease in the unemployment and inflation rates. a. True b. False

Excessive government spending can cause demand-pull inflation. a. True b. False

The classical economists believe that prices and wages quickly adjust to keep the economy operating at full employment. a. True b. False

An increase in the per unit costs of production within an economy will cause the aggregate supply curve to shift to the right. a. True b. False

An increase in total spending in the economy will shift the aggregate demand curve to the left. a. True b. False

The aggregate demand curve slopes downward because of the real balances, interest-rate, and net exports effects. a. True b. False

Cost-push inflation is caused by supply shocks like higher oil prices and poor weather conditions. a. True b. False

EX. 1 In Exhibit 10-8, if aggregate demand shifts from AD1 to AD2, a. real GDP will increase from $3.0 to $7.0, and the price level will remain the same. b. real GDP will increase from $3.0 to $4.0, and the price level will remain the same. c. real GDP and the price level will both remain the same. d. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140.

. In Exhibit 10-8, if aggregate demand shifts from AD1 to AD3, a. real GDP will increase from $3.0 to $4.0, and the price level will increase from 100 to 140. b. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 140. c. real GDP will increase from $3.0 to $4.0, and the price level does not change. d. real GDP will increase from $3.0 to $7.0, and the price level will increase from 100 to 120. e. real GDP will not change and the price level will increase from 100 to 140.

In Exhibit 10-8, if aggregate demand shifts from AD5 to AD4, real GDP will: a. not change, and the price level will fall from 170 to 100. b. not change, and the price level will fall from 140 to 100. c. fall from $8.0 to $6.0, and the price level will not change. d. fall from $8.0 to $6.0, and the price level will fall from 140 to 120. e. not change, and the price level will fall from 170 to 140.

The national debt is best described as the: a. amount by which this year's federal spending exceeds its taxes. b. value of all U. S. Treasury bonds owned by foreigners. c. sum of all federal budget deficits, past and present. d. percentage of GDP needed to finance a country's investment

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government? a. It increases the reported deficit. b. It reduces the reported deficit. c. It exerts no effect on the reported deficit. d. It increases the deficit during an economic boom but reduces it during a recession.

Which of the following is true? a. A budget deficit will have no impact on the national debt. b. A budget deficit will increase the national debt. c. A balanced budget will increase the national debt. d. A budget surplus will increase the national debt.

Which of the following groups analyzes federal budgets proposals? a. The Council of Economic Advisors. b. The Office of Management and Budget. c. The Congressional Budget Office. d. The House and Senate Budget Committees.

Each year, the president must submit a budget proposal to Congress by: a. January. b. April. c. July. d. October.