Unformatted text preview: int B in the long run. B. decrease the money supply, so the economy moves to point B in the long run. C. increase the money supply, so the economy moves to point A in the long run. *** D. decrease the money supply, so the economy moves to point A in the long run. 31. Faced with recession, the government wants to stimulate aggregate demand. The economic advisor to the government estimates that the marginal propensity to consume is 0.75. If the government increases its expenditure by $10 billion, and there is no crowding out effect, then A. aggregate demand will increase by $40 billion. *** B. aggregate demand will decrease by $40 billion. C. aggregate demand will increase by $10 billion. D. aggregate demand will decrease by $10 billion. E. aggregate demand will increase by $7.5 billion. [Use the following table to answer questions 32–33.] Not in the labor force 12,000
Unemployed 3,000 32. What is the unemployment rate? A. 16.67% *** B. 11.11% C. 10.00% D. 5.55% 33. What is the labor force participation rate? A. 40% B. 50% C. 60% *** D. 70% 34. If the government pursues an expansionary fiscal policy by lowering the tax rates in the economy, then the increase in the aggregate consumption in the economy will be larger if the A. tax cut is temporary. B. current price level is high. C. tax cut is permanent. *** D. current price level is low. 35. Which of the following are considered to be automatic stabilizers in an economy? A. the actual inflation rate. B. the unemployment insurance system. *** C. the money supply. D. the expected inflation rate. E. [All of the above] 36. If the U.S. imposes a tariff on steel imported from South America, then A. both the U.S. interest rate and the real exchange rate will rise. B. the U.S. interest rate will increase but the real exchange rate will be unchanged. C. the U.S. real exchange rate wi...
View Full Document
- Spring '08