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Say that the U.S. is in a typical expansion with a bit of inflation. Then, fiscal policy changes and T rises a bit. Which of the following is most likely?

1) Less Inflation

2) Less growth

3) Recession

4) Deflation

5) A larger increase in prices

6) A larger increase in real GDP

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

TRUE or FALSE?

1. Real GDP can never be greater than potential GDP. 

2. When foreign countries experience an increase in income, this is likely to increase our GDP. 

3. The United States economy spends about as many months in recession as it spends in expansion. 

4. If individuals decrease their consumption spending then this is likely to reduce the growth rate of GDP, all else the same. 

5. Movements of real GDP around potential GDP are called the business cycle. 

6. If total government spending in a given year was $3.7 trillion, then all of this spending counted directly in GDP as part of the government spending (G) category. 

7. The last recession in the United States began in December of 2007. 

8. During a recession, the inflation rate tends to decline. 

9. Changes in spending that cause firms to change their level of production of goods/services are called supply shocks. 

10. All else the same, an increase in income in the United States leads to a decrease in our net exports. 

11. Since 1929 there have been 14 declared recessions in the United States. 

12. Total spending in the economy is equal to consumption + investment + government spending - net exports. 

13. During each recession, potential GDP falls. 

14. Percentage wise, the government collects more tax from individuals than it does from firms. 

15. During a recession, the Federal Reserve pursues contractionary monetary policy. 

16. During a recession, the Federal Reserve is most likely to sell government bonds to the public. 

17. Investment spending increases during periods of recession. 

18. Congress meets about every 6 - 8 weeks to discuss the performance of the economy and potential changes to fiscal policy. 

19. If there is more competition among firms, then the inflation rate will tend to increase. 

20.The demand for labor increases when the economy is in an expansionary phase. 

21. Total spending by the government is about 20% of GDP in the US economy. 

22. The unemployment rate decreases during periods of expansion. 

23. If oil prices increase by 20% then this is an example of a supply shock. 

24. When the Federal Reserve buys government bonds, interest rates are likely to fall. 

25. If Congress wanted to help the economy out of a recession, they would be most likely to reduce government spending and/or increase taxes. 

 

Falsenot in accordance with the fact or reality or actualityMore (Definitions, Synonyms, Translation)

Question 2

  1. For any given expected inflation rate, short-run aggregate supply curves show the relationship between

    the money supply and growth rate of output.

    inflation and growth rate of output.

    production factors and wages.

    inflation and wages.

1 points

Question 3

  1. Why is the SRAS curve steeper above its intersection with the Solow growth curve?

    Wages are stickier in the upward direction.

    Wages are less sticky in the upward direction.

    Lower inflation will lead to faster growth.

    Employees become less motivated to work during times of unexpected inflation.

1 points

Question 4

  1. What factors triggered the Great Depression?

    decreased consumer spending and tight monetary policy

    decreased investment and increased inflation

    decreased employment and increased money supply

    decreased inflation and increased income taxes

1 points

Question 5

  1. How might changes in the money supply be non-neutral in the short run?

    As the amount of money circulating in the economy changes before prices respond, consumers' purchases change accordingly, which leads producers to change production levels.

    When money supply changes in the short run, it will affect nominal, but not real, variables in the short run.

    As money growth increases at a faster rate, it will cause real GDP to grow at an equally faster rate.

    If producers expect inflation to increase, they will increase supply in order to sell before the arrival of inflation.

1 points

Question 6

  1. For a given nominal interest rate, an increase in deflation will cause the real rate of interest to

    remain relatively constant.

    increase.

    decrease.

    become unpredictable.

    Question 8

    Which of the three price indexes measures the average price level of the largest total number of goods?

    the consumer price index

    the GDP deflator

    the producer price index

    Each price index accomplishes the same task.

    The textbook uses the

According to classical economists, which one of the following is the correct (recommended) sequence of occurrences?

A. The economy is in a recession, production falls and unemployment rises ==> the government increases spending, the money supply, and lowers taxes ==> total spending rises ==> employment rises ==> GDP rises
B. The economy is in a recession, production falls and unemployment rises ==> prices, wages, and interest rates decrease ==> business costs fall, profits rise, borrowing and consumer spending rise ==> employment and production rise ==> GDP rises
C. The economy is in an expansion, incomes are rising and production increases ==> the government decreases spending ==> less inflation ==> the economy continues to expand
D. The economy is in a recession, production falls and unemployment rises ==> spending falls ==> more layoffs ==> less production ==> more layoffs ==> deeper recession
E. The economy is in an expansion ==> prices rise ==> consumer spending falls ==> production falls ==> the economy contracts (recession)

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