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Questions Bank (1401325 total)
Recall the PAE model you studied in class, where
The unlabelled diagram below presents the initial equilibrium in Country X. Initially, government budget is at balance.
Assume that the government of Country X has increased its expenditures (G) but did not change the taxes (T0), such that the government budget is now in a deficit. Which diagram below is the best representation of this change?
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Recall the PAE model you studied in class, where
The unlabelled diagram below presents the initial equilibrium in Country X.
Assume that due to increasing uncertainty about the future state of the economy, households in Country X increased their exogenous (i.e., autonomous) savings.
Which diagram below is the best representation of this change?1.
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The following equations describe an economy, where Y* is potential GDP.
Suppose the government of this economy used its fiscal policy instruments to ensure that actual GDP was equal to potential GDP. What is the value of net exports in this economy when the output gap becomes zero?
According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to _____ in inflation.
Consider a one period (discount) bond that pays $100 at the end of the year.
If the current interest rate is 4 percent per-annum, the current price of the bond is ___________. On the other hand, if the current interest rate rises to 6 percent per-annum, the price of the bond _________.
The following table provides data for 2019 for an economy. All data are in real or constant price terms.
What is the size of the primary budget balance?
The following table reports data on consumption and pre-tax income for Utopia. The marginal tax rate in Utopia is 10% (i.e. t = 0.1)
Calculate the marginal propensity to consume out of disposable income in Utopia.
An automatic stabiliser is:
Suppose – in a closed economy – the marginal propensity to consume is 0.75 and the marginal tax rate is 0.3. What is the magnitude of the government spending multiplier?
Use the following figure to answer the question:
While not showing in the graph, suppose that the current equilibrium GDP is 5000. How much should autonomous spending change in order to close the output gap? Note that the potential GDP is shown as Y*.