Unit 3 Review

Front

MPC is .75. If the government simultaneously increases spending by $100B and increases taxes by $100B, what will the net effect on the economy be?

Back

AD would shift right

Front

Due to a negative supply shock the economy is sliding into a recession. Which of the following automatic stabilizers would mitigate the negative effects of the recession: Increase in unemployment benefits, Decrease in welfare payments, Government increases spending, Government increases taxes?

Back

Increase in unemployment benefits

Front

If the government wants to increase GDP by $90B, assuming MPC is .8 they will need to increase spending by how much?

Back

$18B

Front

Due to high inflation, if the government wants to slow down GDP growth this year by $30B, which action are they most likely to take? Options: Cut Spending by $50B, Increase Taxes by $10B, Increase Taxes by $30B, Increase Exports by $15B

Back

Increase Taxes by $10B

Front

OPEC (Organization of the Petroleum Exporting Countries) decides to permanently increase oil production by 10 Million barrels per day. What effect will this have on the US Economy?

Back

LRAS will shift right

Front

If an economy is experiencing an inflationary gap what is the most likely effect on the economy?

Back

Output has increased

Front

What economic condition results from a negative supply shock?

Back

Stagflation

Front

Assume an employee made $50k last year and $55k this year. If inflation was 5% what is the net effect?

Back

Real wealth increased

Front

The Aggregate Demand Curve assumes that

Back

Changes in the price level affect real wealth

Front

Aggregate Demand is measured by adding which of the following: Government spending, Investment spending, Net Exports, Household consumption?

Back

Government spending, Investment spending, Net Exports, Household consumption