Government Flash Cards
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when government spending is less than tax revenues in a given year
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The federal budget surpluses:
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government spending exceeds tax revenues during a fiscal year
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When the federal budget runs a deficit:
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will increase aggregate demand & shift the AD curve to the right
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If the government chooses to increase government expenditure or to decrease taxes, according to the AS/AD model:
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stagflation
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The reduction in consumption, investment or net exports that occurs when government spending increases is known as:
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taxes increase
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Per capita GDP decreases when:
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tax revenues will fall sharply during a recession as national income falls; government transfer payments (unemployment, food stamps) will also increase, both offsetting the affects of the recession
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The federal budget works as an automatic economic stabilizer because:
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faster; convergence They grow faster in terms of real GDP per capita
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Ceteris paribus, relatively poor countries tend to grow ____ than relatively rich countries, known as ____
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aggregate demand will decrease & shift the aggregate demand curve to the left
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A reduction in the money supply causes:
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shift the aggregate demand curve to the right, meaning the total demand for all goods & services contained in GDP has increased
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In short run, an increase in aggregate demand will:
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prices do not change or do not change very much
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The short run in macroeconomics is the period in which:
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output will decrease
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If the capital-labor ratio of an economy decreases, ceteris paribus:
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entitlements & mandatory programs
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The largest category of federal spending is:
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technological advance (increased knowledge/skills complement out current investments in physical capital & education enables production/ideas)
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Education can contribute to economic growth through:
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output
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Economic growth is best measured as an increase in:
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increased; decreased
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If government wants to reduce unemployment, government spending should be ____ and/or taxes should be ____
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they can afford the spending on research & development, creative destruction, induced inventions, education, & the investments in human capital
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Larger markets are likely to promote faster technological innovation because:
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expansion
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If output is rising & unemployment is falling, the economy must be in a(n):
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inflation is occuring & demand decreases
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When the general price level rises:
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unemployment rises
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Because a tax on labor makes labor more expensive & raises the marginal cost of hiring workers, it follows that:
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the US has the largest percentage of scientists & engineers
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The fast pace of technological progress in the US can be explained due to the fact that:
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as labor increases, labor productivity decreases
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Diminishing returns implies that:
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demand decreases & wages of attendants will fall
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If the price of airline tickets rises, what will happen to the demand for flight attendants?
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the individual contribution the worker makes to profit
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When a profit-maximizing firm decides to employ a worker, that decision is based on:
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can increase output, even if it is not accompanied by an increase in labor force
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An increase in the capital stock:
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sum of frictional to structural unemployment
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The natural rate of unemployment is generally thought of as the:
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cyclical
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Changes in unemployment that occur as the economy expands & contracts are called ____ unemployment
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increase; increase
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Mike just graduated & is now looking for a job, but has not yet found one. This causes the unemployment rate to ___ & labor-force participation rate to ____
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labor force to total population 16 years old or older
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The labor-force participation rate is the ratio of the:
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GDP accounting rules do not adjust for production that causes environmental damage, it does not include all economic activities in the economy, and it does not say anything about the distribution of income
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GDP is not a perfect measure of social welfare & the society's economic well-being because:
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the sale of Firestone tires to Ford, the sale of stocks, the purchase of a used car
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Which of the following is not included in GDP?
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income & substitution effects
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The price of hamburgers drop & you find that people eat more hamburgers. Assume hamburgers are a normal good. The change in quantity demanded resulting from the change in price is due to:
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b
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Most governments provide a "social safety net" for all of the following except: a. to redistribute income from rich to poor b. to eliminate the risks associated with a market c. to reduce the uncertainty associated with a market economy d. to guarantee a minimum level of income to citizens
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has lower opportunity cost for copper, which means it should specialize in copper & trade
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Argentina & Chile are engaged in production of copper & wheat, & Argentina has an absolute advantage in the production of both. If Chile has a comparative advantage in the production of copper, then Chile:
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what products to produce
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Allocating scarce resources means answering the question(s) of:
