Econ Exam #3 – Flashcards
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10) Which of the following is considered investment spending in macroeconomics?
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GM builds a new plant to manufacture automobiles.
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10) Physical capital is purchased through investment spending, which in turn is mostly financed out of:
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domestic and foreign savings.
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10) Private savings is equal to:
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income after taxes minus consumption.
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10) 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. (Closed Economy S = I) How much is private saving?
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$3.5 Trillion
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10) 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. Closed Economy S = I) What is the government budget balance?
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a deficit of $1.5 trillion
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10) 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. How much is national saving?
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$2 Trillion
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10) 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. How much is investment spending?
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$2 Trillion
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10) A budget surplus exists when which of the following occurs?
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Taxes are greater than government spending.
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10) One difference between a closed and an open economy is that:
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in the latter, foreign savings complement domestic savings in financing investment spending.
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10) 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 trillion. Open Economy S = I) How much is the net capital inflow?
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$2 Trillion
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10) 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 trillion. Open Economy S = I) How much is investment spending?
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$4 Trillion
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10) Assume that I = (S)private + (S)government + (IM - X). Furthermore, let's say that imports are equal to exports. Given this situation, which of the following is true?
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Private savings plus government saving are equal to investment.
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10) The demand for loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity demanded of loanable funds.
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downward; investors; increasing
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10)The supply of loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity supplied of loanable funds.
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upward; savers; decreasing
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10) All of the following scenarios are associated with government budget deficits EXCEPT:
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The total amount of borrowing decreases.
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12) The negative relationship between the aggregate price level and aggregate output demanded gives the aggregate demand curve:
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a downward slope.
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12) The aggregate demand curve shows the relationship between the aggregate price level and:
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the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world.
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12) in general, a change in the price level, all other things unchanged, causes:
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a movement along the aggregate demand curve.
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12) According to the wealth effect, when prices decrease, the purchasing power of assets:
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increases and consumer spending increases.
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12) The components of aggregate demand are:
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C (consumption), I (investment), G (government) expenditures, and X - IM (net exports).
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12) Suppose that the stock market crashes. Which of the following is most likely to occur?
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the aggregate demand curve shifts to the left
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12) Which of the following factors cannot shift the aggregate demand curve?
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changes in the price level
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12) Increasing the quantity of money in circulation shifts the:
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aggregate demand curve to the right.
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12) The aggregate supply curve shows the relationship between:
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the aggregate price level and the quantity of aggregate output supplied.
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12) The SRAS curve is upward sloping because:
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a higher aggregate price level leads to higher output since most production costs are fixed in the short run.
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12) According to the short-run aggregate supply curve, when the _________ rises, the quantity of _________ rises.
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aggregate price level; aggregate output supplied
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12) Which of the following will shift the short-run aggregate supply curve to the right?
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an economy-wide decrease in commodity prices
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12) Which of the following would cause a shift in the short-run aggregate supply curve?
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change in commodity prices
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12) The long-run aggregate supply curve is:
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vertical.
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12) The point where the long-run aggregate supply curve intercepts the horizontal axis:
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is the economy's potential output.
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12) An aggregate output level lower than potential output means there will be:
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high unemployment.
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12) Producing a short-run level of aggregate output that exceeds the economy's potential output results in:
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an upward adjustment in nominal wages.
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12) In the short run, a positive demand shock:
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increases aggregate output and the aggregate price level.
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12) A natural disaster that destroys part of a country's infrastructure is a type of _________ and therefore shifts the _________ to the _________.
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negative supply shock; short-run aggregate supply curve; left
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12) An increase in investment leads to _______ in the price level and _______ in real GDP in the short run.
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an increase; an increase
