Question

Question 1 (1 point) An increase in government spending will shift the aggregate demand curve to the left. True False Question 2 (1 point) When federal government spending exceeds tax revenues, the federal government runs a budget surplus True False Question 3 (1 point) Taxation and government spending are examples of fiscal policy tools used to stabilize an economy. True False Question 4 (1 point) Gross domestic product calculations count only final goods and services because: a one cannot calculate the quantities of intermediate goods produced. b these are the only goods and services that are purchased in an economy. c counting all goods and services would lead to double-counting of many activities. d it is difficult to measure the prices of intermediate goods produced. Question 5 (1 point) When consumers realize additional income in a household and spend the additional money, the portion of the additional income that is spent is measured by the: a marginal propensity to consume. b measure of individual wealth. c aggregate demand factor. d credit increase theory. Question 6 (1 point) What is the deflator used for calculating real GDP ? a The Consumer Price Index b The Wholesale Price Index c A non-specific price index d The Index of Industrial Production. Question 7 (1 point) A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it and spins it into yarn. The yarn is then sold to a knitting mill, which produces and sells sweaters. In calculating GDP we would count: a only the raw wool and the yarn. b only the sweaters. c only the yarn and the sweaters. d the raw wool, the yarn and the sweaters. Question 8 (1 point) An economic ________ refers to either an upturn or a downturn in the economy. a chain index b model c fluctuation d stagnation Question 9 (1 point) Aggregate demand will be affected by the purchasing power of money. True False Question 10 (1 point) Involuntary unemployment is : a Unemployment that occurs in spite of the willingness to work at the going real wage rate. b Synonymous with structural unemployment. c Synonymous with transitional unemployment. d Synonymous with frictional unemployment

Answer 1

1. False
(Increase in G will increase AD and shift it to the right.)

2. False
(When G > T, then there is a budget deficit.)

3. True
(Fiscal policy tools to stabilize the economy are G and T.)

4. c counting all goods and services would lead to double-counting of many activities.
(To avoid double countibg, only value of final goods and services is included.)

5. a marginal propensity to consume.
(Additional consumption is measured as the MPC.)

(Note: As HOMEWORKLIB's policy, 4 MCQs are to be answered at a time.)