1. 1) In this example of the Classical adjustment process, unemployment
will tend to hold steady at the natural level of _five _ million
2) In this example of the Classical adjustment process, the recession is
avoided when _ Consumption spending b
Regressive taxation is present when marginal (additional) tax rates
_( none of increase or rise or stay the same) with additional
2. Pure competition is when the market consists of a _very large
number of _ producers and consumers such as in ag
1. If the MPS is 0.2 and a component of AD, such as Investment, is increased
by $10, then the maximum amount of change in income and output for
the nation would be _$50 _ .
2. 1) In this example of the Keynesian adjustment process, the total number
1. One of the potential benefits of the borrowing that creates
national debt is the _economic growth (expanding PPF) _
that it can create if the money is invested wisely in public
2. _Fiscal _ policy is the planned use of government taxation
1. In the graph above that the market equilibrium exists when
Quantity Demanded = Quantity Supplied at a quantity of
approximately 2.5 units and a price of about _7_.
2. When government sets a price higher than equilibrium, a Price
_Floor_ is created.
1. _Transfer Payments _ include veterans payments, welfare, and social
2. The amount of _leisure time _ is a positive measure of social
welfare, but is not considered in GDP calculations.
3. Investment is the amount of funds spent by bu
1. 1) In this example the Feds well thought out version of an Open
Market Operation, returns the economy to a non-inflationary, fully
employed economy with _120_million people at work.
2) In this example the Feds well thought out version of an Open
Unit 1 Homework
Chapter 1 Question 1:
a. If the family spends more on the car they will have to spend less on something else like
b. When deciding how much money to distribute towards nati
1._David Ricardos_ views were parallel to AdamSmith advocating a
free and open economy, unencumbered by government restrictions
David Ricardos most significant theory was _Comparative Advantage
_ , arguing that a nation will gain through trade by producin
1. The Board of Governors is the policy making body at the FED and
is responsible for setting the _discount rate _ (rate of
interest charged to commercial banks) and the reserve
requirements (the amount of customer deposits which commercial
banks must hol
1. 1) As a result of the Feds tight money approach in this example, the
Real Spending GDP _decreases to $5000 _ billion.
2) As a result of the rising interest rates in this example, Businesses
choose to reduce their Investment Spending by $_200_ billion.
1. By the Rule of 70 if a nations prices are inflating at 7 percent it will take
_10_ years for the prices to double.
2. 1)Use the figure below to answer the following question: Keynesian analysis
assumes that an economy with high unemployment would have
(1 of 18)
The concept of scarcity implies that we have a limited amount
of _ compared to our desire to have more of
everything which they can provide.
_ is the goal that assumes the global economy
can achieve balanced economic conditions whi
a. GDP Growth Rate-2.4% Ranked 131 in the World.
b. Industrial Production Growth Rate-2.8% Ranked 103 in the World.
c. These facts show that we could be doing much better in terms of prod