ECO 182 EXAM 2 UB ACTUAL QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS VERIFIED
In the classical model, an increase in the unemployment rate
will likely be temporary.
According to the traditional Keynesian analysis, if the government increases
spending by $10 million, then
consumption will increase, and so total expenditures will increase by more than $10
million.
Fiscal policy may end up being destabilizing to an economy because
various time lags associated with fiscal policy cause the policy changes to take effect
too late
Suppose that the government of Summerfield spends $2 trillion in 2013 and
receives tax revenues
Summerfield has a budget deficit of $0.5 trillion.
According to the Keynesian approach, an increase in taxes
will reduce consumption by an amount less than the change in taxes
According to the interest rate effect, an increase in the price level, if other factors
are held constant,
will lead to
an increase in the real interest rate
or
, a reduction in total real spending on interest—rate—sensitive goods
There is a distinction between the long-run aggregate supply (LRAS) curve and
the short-run
aggregate supply (SRAS) curve. ln the long run,
all adjustments to changes in the price level have been made, but in the short run all
changes
in the price level do not occur.
Keynes and his followers believed that
there was no guarantee that a capitalist economy would reach a full employment
equilibrium.
Are federal budget deficits related to trade deficits?
Yes. As deficit spending goes up, i.t is likely government borrowing will, too. Then
foreign
residents who lend funds to the U.S. government have less to spend on our goods, so
U.S.
exports will fall.
Given the assumptions of the classical model
the market is a self—correcting mechanism.
To the extent that the political process of moving legislation through Congress is
slow
the action time lag will be long
The long-run aggregate supply curve
COMPLETE SOLUTIONS VERIFIED
In the classical model, an increase in the unemployment rate
will likely be temporary.
According to the traditional Keynesian analysis, if the government increases
spending by $10 million, then
consumption will increase, and so total expenditures will increase by more than $10
million.
Fiscal policy may end up being destabilizing to an economy because
various time lags associated with fiscal policy cause the policy changes to take effect
too late
Suppose that the government of Summerfield spends $2 trillion in 2013 and
receives tax revenues
Summerfield has a budget deficit of $0.5 trillion.
According to the Keynesian approach, an increase in taxes
will reduce consumption by an amount less than the change in taxes
According to the interest rate effect, an increase in the price level, if other factors
are held constant,
will lead to
an increase in the real interest rate
or
, a reduction in total real spending on interest—rate—sensitive goods
There is a distinction between the long-run aggregate supply (LRAS) curve and
the short-run
aggregate supply (SRAS) curve. ln the long run,
all adjustments to changes in the price level have been made, but in the short run all
changes
in the price level do not occur.
Keynes and his followers believed that
there was no guarantee that a capitalist economy would reach a full employment
equilibrium.
Are federal budget deficits related to trade deficits?
Yes. As deficit spending goes up, i.t is likely government borrowing will, too. Then
foreign
residents who lend funds to the U.S. government have less to spend on our goods, so
U.S.
exports will fall.
Given the assumptions of the classical model
the market is a self—correcting mechanism.
To the extent that the political process of moving legislation through Congress is
slow
the action time lag will be long
The long-run aggregate supply curve
