Econlecture10

MidtermII-review

True/False

Indicate whether the sentence or statement is true or false.

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1. President Bush in 2001 wanted a tax cut to stimulate consumer spending.

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2. The tax rebate in July of 2001 reduced the disposable income of U.S. consumers.

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3. Aggregate demand is the sum of total domestic spending by the private sector.

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4. Aggregate demand is the total demand for the final goods and services produced in an economy.

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5. An example of investment is the purchase of machinery by a manufacturing company.

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6. National income minus personal taxes net of transfer payments equals disposable income.

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7. Government transfer payments is income earned by individuals who work for the federal government.

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8. Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or

unemployment.

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9. The counterpart to the unsold output of firms is the lack of jobs for workers willing to work.

____ 10. When demand for goods and services is high, firms are more likely to hire more workers.

____ 11. The Aggregate Supply Curve is a fixed point representing potential GDP.

____ 12. An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

____ 13. Over time, aggregate demand and aggregate supply grow by the same amount.

____ 14. Fiscal policy is the use of taxes and spending by the government to affect aggregate demand.

____ 15. In 2001, the Japanese economy was experiencing an inflationary gap.

____ 16. A tax reduction shifts the consumption schedule downward.

____ 17. The personal income tax varies as GDP changes.

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

____ 18. Which of the following services have experienced declines in relative prices due to productivity increases?

a. medical services

b. restaurant meals

c. theatrical performances

d. Internet access services

____ 19. The graph...