Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?
a. Decreasing taxes to protect consumers from the effects of inflation
b. Increasing taxes to reduce aggregate demand
c. Increasing government spending to provide some of the goods that consumers can no longer afford at the higher prices
d. Decreasing government spending to cause a decrease in the demand for money
e. Increasing transfer payments to poor people, who are hurt the most by the inflation
QUESTION 2If the value of exports equals 6.5 billion and the value of imports equals 8.0 billion in a year, then:
a. together imports and exports add 1.5 billion to the gross domestic product (GDP).
b. together exports and imports add 6.5 billion to the gross domestic product (GDP).
c. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion.
d. together exports and imports reduce the gross domestic product (GDP) by 1.5 billion.
e. together exports and imports add nothing to the gross domestic product (GDP).
QUESTION 3If more and better technology is used for producing wheat in the United States than in a lesser-developed country, then the:
a. MRP of the U.S. workers will be higher than the MRP of the workers in the lesser-developed country.
b. MRP of the U.S. workers will be lower than the MRP of the workers in the lesser-developed country.
c. demand for the U.S. workers will be lower than the demand for the workers in the lesser developed country.
d. price of wheat will be higher in the United States than in the lesser-developed country.
e. wages of the U.S. workers will be lower than the wages of the workers in the lesser-developed country.
QUESTION 4The exact change in equilibrium output due to a shift in short-run aggregate demand depends on:
a. the amount of tax imposed
b. the steepness of the aggregate supply curve.
c. the steepness of the aggregate demand curve
d. the gap between the supply curve and the demand curve.
e. the consumption pattern in the economy.
QUESTION 5Net exports equals _____.
a. the value of exports minus the value of imports
b. the value of imports minus the value of exports
c. the value of imports minus tariffs
d. the value of exports minus tariffs
e. the value of exports plus the value of imports minus depreciation
QUESTION 6A decrease in the marginal product of labor would be represented by a(n):
a. increase in labor demand.
b. decrease in labor demand.
c. increase in the quantity demanded of labor.
d. decrease in the quantity demanded of labor.
e. increase in wages.
QUESTION 7When government purchases increase, the spending multiplier indicates the _____.
a. amount of movement along the aggregate demand curve
b. amount of movement along the aggregate supply curve
c. size of the rightward shift of the aggregate demand curve at a given price level
d. size of the rightward shift of the aggregate supply curve at a given price level
e. size of the expansionary gap
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