ANALYZED ECONOMIC – 1002 FINAL EXAM

ANALYZED ECONOMIC – 1002 FINAL EXAM The _________ refers to the continually reoccurring periods of expansion and contraction of real GDP - CORRECT ANSWER -business cycle The Business Cycle Reference Dates reported by the NBER keep track of when _________________ in the united states begin and end - CORRECT ANSWER -recessions A _______________ is a very severe and long-lasting recession - CORRECT ANSWER -depression An employed worker is part of the economy's ___________________ - CORRECT ANSWER -labor force Recessions are associated with falling real GDP and a rising ___________ - CORRECT ANSWER unemployment rate When a firm is forced into __________________ it must shut down and sell its output and other assets at distressed prices - CORRECT ANSWER -liquidate According to Fisher's _____________________ Theory deflation occurs during severe economic downturns and increases the real value of debt - CORRECT ANSWER -Debt-Deflation A policy of increasing the money supply to prevent deflation during a sever economic downturn is called a ___________________ policy - CORRECT ANSWER -reflation The Keynesian _________________________ gives aggregate consumption as a linear function of aggregate output - CORRECT ANSWER -consumption function If consumption increases by 0.65 whenever output increases by 1 then the _______________________ equals 0.65 - CORRECT ANSWER -marginal propensity to consume (MPC) If an increase in government spending results in an even larger increase in output then the _____________________ is greater than 1 - CORRECT ANSWER -spending multiplier When the MPC has a small value close to 0 then the __________________ will also have a small value close to 1 - CORRECT ANSWER -spending multiplier A government following a Keynesian policy of increasing spending during a recession is hoping to ______________ the economy - CORRECT ANSWER -stimulate Fiscal spending stimulus is more likely to be effective if it is __________________ rather than paid for with an increase in taxes - CORRECT ANSWER -deficit financed If government borrowing leads to higher interest rates and lower C and I then the _________________________ is strong - CORRECT ANSWER -crowding out effect The goal of _____________________ is to use fiscal policy to target the full employment level of output - CORRECT ANSWER -stabilization policy When real GDP is less than the full employment output level there is an ____________________ - CORRECT ANSWER -output gap The U.S. economy has experienced economic growth for some time now, so we must be due for a recession some time in the near future (T/F) - CORRECT ANSWER -False. In the past there have been long periods of economic expansion, as well as short periods. Historically, recession have not occurred right at regular intervals.