13. (TCO 4) A recession is a decline in the inflation rate that lasts six months or longer the unemployment rate that lasts six months or longer real GDP that lasts six months or longer potential GDP that lasts six months or longer 14. (TCO 4) The unemployed are those people who do not have jobs. are not employed but are seeking work are not working are not working 15. (TCO 4) GDP is the market value of resources (land, labor, capita, and entrepreneurship) in an economy in a given year all final goods and services produced in an economy in a given year consumption and investment spending in an economy in a given year all output produced and accumulated over the years 16. (TCO 4) Nominal GDP differs from real GDP because nominal GDP is based on constant prices real GDP is based on current prices real GDP is adjusted for changes in the price level nominal GDP is adjusted for changes in the price level 17. (TCO 6) When the federal government uses taxation and spending actions to stimulate the economy it is conducting fiscal policy incomes policy monetary policy employment policy 18. (TCO 6) Refer to the graph. What combination would most likely cause a shift from AD1 to AD3? Increases in taxes and government spending Decrease in taxes and increase in government spending Increase in taxes and decrease in government spending Decreases in taxes and government spending 19. (TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly increases in taxes and government spending decreases in taxes and government spending increases in government spending and decreases in taxes decreases in government spending and increases in taxes 20. (TCO 6) The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the crowding-out lag recognition lag operational lag administrative lag Page 2 1. (TCO 5) A decrease in government spending will cause a(n) increase in the quantity of real domestic output demanded decrease in the quantity of real domestic output demanded decrease in aggregate demand increase in aggregate demand 2. (TCO 5) The long-run aggregate supply curve is upward-sloping and becomes steeper at output levels above the full-employment output upward-sloping and becomes flatter at output levels above the full-employment output horizontal vertical 3. (TCO 5) Which would most likely increase aggregate supply? An increase in the prices of imported products An increase in productivity A decrease in business subsidies A decrease in personal taxes 4. (TCO 5) Deflation refers to a situation where price level falls price level rises the rate of inflation falls the rate of inflation rises 5. (TCO 6) Dissaving occurs when income is greater than saving income is less than consumption saving is greater than consumption saving is greater than the interest rate 6. (TCO 7) The M1 money supply is composed of all coins and paper money held by the general public and the banks bank deposits of households and business firms bank deposits and mutual funds checkable deposits and currency in circulation
13. (TCO 4) A recession is a decline in the inflation rate that lasts six months or longer
the
real GDP that lasts six months or longer
potential GDP that lasts six months or longer
14. (TCO 4) The unemployed are those people who
do not have jobs.
are not employed but are seeking work
are not working
are not working
15. (TCO 4) GDP is the market value of resources (land, labor, capita, and entrepreneurship) in an economy in a given year
all final goods and services produced in an economy in a given year
consumption and investment spending in an economy in a given year
all output produced and accumulated over the years
16. (TCO 4) Nominal GDP differs from real GDP because nominal GDP is based on constant prices
real GDP is based on current prices
real GDP is adjusted for changes in the price level
nominal GDP is adjusted for changes in the price level
17. (TCO 6) When the federal government uses
incomes
monetary policy
employment policy
18. (TCO 6) Refer to the graph. What combination would most likely cause a shift from AD1 to AD3?
Increases in taxes and government spending
Decrease in taxes and increase in government spending
Increase in taxes and decrease in government spending
Decreases in taxes and government spending
19. (TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly
increases in taxes and government spending
decreases in taxes and government spending
increases in government spending and decreases in taxes
decreases in government spending and increases in taxes
20. (TCO 6) The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the crowding-out lag
recognition lag
operational lag
administrative lag
Page 2
1. (TCO 5) A decrease in government spending will cause a(n)
increase in the quantity of real domestic output demanded
decrease in the quantity of real domestic output demanded
decrease in aggregate
increase in aggregate demand
2. (TCO 5) The long-run
upward-sloping and becomes steeper at output levels above the full-employment output
upward-sloping and becomes flatter at output levels above the full-employment output
horizontal
vertical
3. (TCO 5) Which would most likely increase aggregate supply? An increase in the prices of imported products
An increase in productivity
A decrease in business subsidies
A decrease in personal taxes
4. (TCO 5) Deflation refers to a situation where
price level falls
price level rises
the rate of inflation falls
the rate of inflation rises
5. (TCO 6) Dissaving occurs when income is greater than saving
income is less than consumption
saving is greater than consumption
saving is greater than the interest rate
6. (TCO 7) The M1 money supply is composed of
all coins and paper money held by the general public and the banks
bank deposits of households and business firms
bank deposits and mutual funds
checkable deposits and currency in circulation
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