ECON 2000 Chapter Notes - Chapter 5: Government Budget Balance, United States Dollar, Canadian Dollar
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An economy with zero net exports is described below:
C | = 100 + 0.6 (Y 'T) |
I p | = 70 |
G | = 120 |
NX | = 0 |
T | = 150 |
The multiplier in this economy is 2.5. | |
A. Find short-run equilibrium output.
Instruction: Enter your response as an integer value.
Short-run equilibrium output: .
B. Economic recovery abroad increases the demand for the country's exports; as a result, NX rises to 80.
Instruction: Enter your response as an integer value.
Short-run equilibrium output (Click to select)decreases/ increases to ________ .
C. Assume that foreign economies are slowing, reducing the demand for the country's exports so that NX = -80. (A negative value of net exports means that exports are less than imports.)
Instruction: Enter your response as an integer value.
Short-run equilibrium output (Click to select)increases/decreases to ___________ .
D. Which of the following best describes the tendency of recessions and expansions to spread across countries?
1. Lower planned aggregate spending in one nation will reduce the amount of goods it exports abroad, thereby lowering the value of imports for its trading partners, which will reduce its short-term equilibrium output as well.
2. Lower planned aggregate spending abroad means that fewer goods will be exported from a specific nation, leaving more goods available for domestic consumption (C) in that nation, which will increase its short-term equilibrium output.
3. Lower planned aggregate spending abroad will reduce the amount of investment that flows into domestic industries from other countries, thereby reducing domestic short-term equilibrium output.
4. Lower planned aggregate spending in a nation means fewer imports of foreign goods, thereby reducing the short-term equilibrium output of its trading partners through lower net export (NX) values in those nations.
6. To study the macroeconomy we must combined prices and quantities generated in single-product markets into broad aggregates.
a) | True |
b) | False |
7. An economist who favored expanded government would recommend:
a) | tax cuts during recession and tax increases during inflation |
b) | tax increases during recession and tax cuts during inflation. |
c) | tax cuts during both recession and inflation |
d) | increases in government spending during a recession and tax increases during inflation. |
e) | tax cuts during recessions and reduction in government spending during inflation. |
8. If Government tax revenue exceeds Government spending the result of the budget is
a) | an increase in investment |
b) | a shortage |
c) | an increase in the deficit |
d) | a decrease in savings |
e) | a surplus |
9. Which of the following statements is true?
a) | In the US economy, the net export sector is positive. |
b) | Aggregate demand is the sum of total output produced by all firms in the US. |
c) | The aggregate supply curve is vertical if the price level is equal to the per-unit cost of production |
d) | Aggregate production sums up the four major components C+I+G+Xn in the US economy. |
e) | Government spending is the largest component of aggregate demand. |
10. Which of the following statements is true?
a) When unemployment is rising then real GDP is rising. | |
b) | The required reserve ratio is a tool used by the government to control the demand for money. |
c) | The four components of aggregate supply are the same as aggregate demand. |
d) | when an imported resource such as oil has decreased that is an increase in aggregate demand. |
e) | The four components of aggregate demand---Households, Business, Government, and Net Exports. |