When a recessionary gap occurs, Real output exceeds the natural level of output, and unemployment exceeds its natural rate Real output exceeds the natural level of output, and unemployment is less than its natural rate. Real output is less than the natural level of output, and unemployment exceeds its natural rate. Real output is less than the natural level of output, and unemployment is less than its natural rate.

When a recessionary gap occurs, Real output exceeds the natural level of output, and unemployment exceeds its natural rate Real output exceeds the natural level of output, and unemployment is less than its natural rate. Real output is less than the natural level of output, and unemployment exceeds its natural rate. Real output is less than the natural level of output, and unemployment is less than its natural rate.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter19: The Keynesian Model In Action

Section: Chapter Questions

Problem 8SQP

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When an economy is operating in a negative output gap (Recessionary Gap) which of the following must be true? a. Unemployment is less than full employment b. Employment is greater than full employment c. Employment is equal to Natural rate of unemployment d. Unemployment is greather than the Natural rate of Unemployment.
If output equals 50,000 and full employment real GDP equals 45,000, then this economy has a(n) Multiple Choice employment gap. demand gap. recessionary gap. inflationary gap.
When an economy is operating in a positive output gap (Inflationary Gap) which of the following must be true? a. Unemployment is less than full employment b. Employment is less than full employment c. Employment is equal to full employment d. Unemployment is greater than the Natural rate of Unemployment
The country of Merryville has an unemployment rate that is greater than the natural rate of unemployment. Using a correctly labeled graph of aggregate demand and aggregate supply, show the current equilibrium real gross domestic product, labeled YC, and price level in Merryville, labeled PLC. The president of Merryville is receiving advice from an economic adviser who advises the president to decrease personal income taxes. How would such a decrease in taxes affect aggregate demand? Explain. The government of Merryville increases spending on goods and services by $200 billion, which is financed by borrowing. If the marginal propensity to consume in Merryville is 0.75: Calculate the multiplier What is the maximum possible change in real gross domestic product (GDP) that could result from the $200 billion increase in government spending?
Potential real GDP is defined as: Group of answer choices The quantity of output that the economy can produce when it is above the natural rate of unemployment. The quantity of output that the economy can produce when it is at less than potential employment of its resources. The macro equilibrium The quantity of output that the economy can produce when it is at full employment of its labor and physical capital.
Government spending on unemployment benefits, welfare, Medicare, and other programs during a recession are known as a. social safety nets (automatic stabilizers) that limit the hardships created by a deflationary gap b. additional expenditures the government should not have to pay c. social safety nets (automatic stabilizers) that increase the hardships created by a recession d. social safety nets (automatic stabilizers) that limit the hardships created by an inflammatory gap
When comparing an increase in government spending on goods and services to an increase in private investment spending, in the short run Group of answer choices they will both shift aggregate supply. government spending will shift the aggregate demand and private investment the aggregate supply. government spending is inflationary; private investment is not. they will both shift aggregate demand.
Suppose that actual output is $120 billion and potential (full-employment) output is $156 billion. What is an output gap in this hypothetical economy? Based on your estimate of the output gap, would you expect the unemployment level to be higher or lower than usual?
Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts? a. Permanent tax cuts affect expectations of long-run income more than temporary tax cuts. b. Permanent tax cuts cause movement along the consumption function, while temporary tax cuts shift the consumption function. c. Permanent tax cuts have a greater effect on expected long-run inflation. d. Permanent tax cuts are perceived as minor while temporary tax cuts are larger and more effective.
Suppose that the government believes the economy is not producing goods and services at its optimal level. In an attempt to stimulate the economy, the government increases the quantity of money in the economy by printing more money. This monetary policy the economy's demand for goods and services, leading to product prices. In the short run, the change in prices induces firms to produce goods and services. This, in turn, leads to a level of unemployment. In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to unemployment.
Which of following statements explains why the consumption of all 'weak-willed' households tends to closely track their income? Select one: a. Households suffering from 'weakness of will' try to live beyond their means. b. Households suffering from 'weakness of will' are unlikely to have accumulated savings. c. Households suffering from weakness of will are unlikely to make the effort to find alternative income and employment in the face of a negative shock. d. Weak-willed households tend to borrow more to sustain consumption if their income falls
Which of the following scenarios is an example of a recognition lag? The economy: a)enters a deep recession on the same day that new quarterly data show positive economic growth. b)enters a deep recession, and parliament takes two months to approve an extensive tax-cut bill.b) c)enters a deep recession, and parliament passes spending bills for public works projects that will take years to plan and build. Which of the following scenarios is an example of an administrative lag? a)Policy makers obtain relevant economic data months after a recession has already begun. b)A new law requires that all new spending bills go through at least one month of debate before receiving a parliament vote. c)In response to a recession, parliament passes a spending bill for motorway upgrades that will take years to plan and complete Government financing of deficit spending can offset the deficit's expansionary effect if government borrowing increases interest…