ECO 155 Practice set 6,7,8 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Scenario: Open Economy S = I In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 tril(Scenario: Open Economy S = I) How much is national saving
answer
$2 trillion
question
Which of the following do economists view as investment spending?
answer
Spending on physical capital
question
Which one of the following is an accurate formula for the budget balance?
answer
The budget balance equals taxes minus government spending.
question
The government saves when it:
answer
Has a budget surplus
question
Assume that I = Sprivate + Sgovernment + (IM - X). Furthermore, let's say that imports are equal toexports. Given this situation, which of the following is true?
answer
Private savings plus government saving are equal to investment.
question
GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. 6)(Scenario: Closed Economy S = I) How much is private saving?
answer
$3.5 trillion
question
If a country has a trade surplus, we can conclude that it also has:
answer
A net capital inflow.
question
The store-of-value function of money is:
answer
necessary but not distinctive.
question
Which of the following would NOT fit the economist's definition of money?
answer
Bonds
question
The existence of deposit insurance:
answer
leads depositors to be less inclined to monitor bank operations.
question
The functions of money are:
answer
store of value, unit of account, and medium of exchange.
question
The banking crisis of 1907 that preceded the Great Depression and the recent one in 2008 were both caused by:
answer
risky speculation in real estate and in the stock market.
question
The U.S. dollar is an example of:
answer
fiat money.
question
The money multiplier is equal to:
answer
the ratio of the money supply to the monetary base.
question
Government tax revenue rises and falls with the business cycle as:
answer
an automatic stabilizer
question
If the government's total revenues are greater than its total expenditures, then it has a budget:
answer
surplus
question
Funding for Social Security and Medicare:
answer
comes from dedicated taxes.
question
Contractionary fiscal policy includes:
answer
decreasing government expenditures.
question
The cyclically adjusted budget balance is
answer
an estimate of what the budget balance would be if real GDP were exactly equal to potential output.
question
If the economy exhibited an inflationary gap, the government should follow:
answer
a contractionary policy, which would shift the AD curve to the left.
question
If the government's total revenues are less than its total expenditures, then it has a budget:
answer
deficit
question
13 Social Security spending is projected to:
answer
increase because of the impact of the baby boom.
question
Government's efforts to stabilize the business cycle through fiscal policy can destabilize the economy because of:
answer
lags in the process of crafting a budget appropriate to the circumstances.
question
Government spending and taxation changes that cause fiscal policy to be expansionary when the economy contracts and contractionary when the economy expands are known as:
answer
automatic stabilizers
question
All of the following are sources of state and local tax revenue EXCEPT:
answer
social insurance taxes.
question
Discretionary fiscal policy involves:
answer
using government spending or tax policy to affect aggregate demand.
question
An expansionary fiscal policy either _______ government spending or _______ taxes.
answer
increases; decreases
question
If there is a recessionary gap in the economy, discretionary fiscal policy would likely involve action to:
answer
shift aggregate demand to the right.
question
President Johnson's use of a temporary 10% surcharge on income taxes is a classic example of:
answer
contractionary fiscal policy.
