DC Economics Final Review, Part 1

87. The graph above would best demonstrate what scenario?

• The Chair of the Federal Reserve testifies before Congress that he/she expects the health of the economy to drastically take a downturn in the next few months.

• 1. Firms fear an imminent recession and begin to cut back on spending.

• 1. The Federal government announces another annual budget surplus.

• 1. Congress uses contractionary fiscal policy and does not change the tax rates.

• 1. The flow of foreign financial capital into American financial markets begins to decrease.

87. The graph above would best demonstrate what scenario?

• 1. The Chair of the Federal Reserve testifies before Congress that he/she expects the health of the economy to significantly improve in coming months.

• 1. The Federal government announces a large annual budget deficit.

• 1. The flow of foreign financial capital into American financial markets begins to increase.

• 1. Congress uses expansionary fiscal policy but does not change the tax rates.

• 1. Firms fear an imminent recession and begin to cut back on spending.

87. The graph above would best demonstrate what scenario?

• 1. The Chair of the Federal Reserve testifies before Congress that he/she expects the health of the economy to drastically take a downturn within the next few months.

• 1. Firms fear an imminent recession and begin to cut back on spending.

• 1. The Federal government announces a large annual budget surplus.

• 1. The flow of foreign financial capital into American financial markets begins to decrease.

• 1. Congress uses expansionary fiscal policy but does not change the tax rates.

87. The graph above would best demonstrate what scenario?

• The Chair of the Federal Reserve testifies before Congress that he/she expects the health of the economy to significantly improve in coming months.

• 1. Firms are optimistic about the economic future and increase spending.

• 1. The Federal government announces a large annual budget deficit.

• 1. Congress uses expansionary fiscal policy but does not change the tax rates.

• 1. The flow of foreign financial capital into American financial markets begins to increase.

86. Crowding out can negatively affect the economy by:

• 1. decreasing interest rates.

• 1. decreasing interest rates.

• 1. increasing private borrowing.

• 1. decreasing government deficits.

• 1. reducing investment spending on physical capital.

85. The graph above shows the market for loanable funds in equilibrium. Which of the following might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150?

• 1. Consumers have decreased consumption as a fraction of disposable income.

• 1. The federal government has a budget surplus rather than a budget deficit.

• 1. There has been an increase in capital inflows from other nations.

• 1. Forecasts for future corporate profits are gloomier than expected.

• 1. Businesses have become more optimistic about the return on investment spending.

74. An increase in public saving has what impact on the market for loanable funds?

• 1. the demand for loanable funds increases.

• 1. the supply of loanable funds decreases.

• 1. the demand for loanable funds decreases.

• 1. both the demand and supply of loanable funds decreases.

• 1. the supply of loanable funds increases.

74. An increase in the real interest rate does which of the following?

• 1. reduces saving.

• 1. reduces consumption spending.

• 1. increases the demand for loanable funds.

• 1. reduces the supply of loanable funds.

• 1. reduces the demand for loanable funds.

74. The response of investment spending to an increase in the government budget deficit is called:

• 1. expansionary investment.

• 1. private dissaving.

• 1. income minus net taxes.

• 1. investment dissaving.

• 1. crowding out.

74. Which of the following will increase the real interest rate?

• 1. an increase in the budget surplus.

• 1. a decrease in the demand for loanable funds.

• 1. an increase in the supply of loanable funds.

• 1. an increase in household saving.

• 1. an increase in the demand for loanable funds.