Question Details

Requiring a balanced budget would be destabilizing 



1. "When the news of Wednesday's numbers on GDP was made public, stocks and bonds immediately rose and the U.S. dollar strengthened. Then, when analysis of the numbers came in, the markets went into reverse. The reason was that the greater part of 16 
the improvement in the quarter - $33.7 billion out of a total GDP advance of $39.2 billion - came from additions to business inventories." Markets went into reverse upon learning about the additions to inventories because it suggested that 
a) output had risen, raising inflation fears 
b) output had fallen, raising unemployment fears 
c) aggregate demand had risen, raising inflation fears 
d) aggregate demand had fallen, raising unemployment fears 
2. "But as consumer spending slackened, stocks began to pile up. So an inventory correction is underway, and it will reduce this quarter's real GDP by more than 10 percent at an annual rate." This inventory correction will come about because of 
a) lower output causing inventories to fall to what firms desire 
b) higher output causing inventories to rise to what firms desire 
c) lower aggregate demand causing inventories to rise to what firms desire 
d) higher aggregate demand causing inventories to fall to what firms desire 
3. "What cannot be done, various reformers in the U.S. notwithstanding, is to impose on any government the obligation to balance its budget annually. Consider the consequences. If it did work, it would introduce a major destabilizing element." Requiring a balanced budget would be destabilizing because a movement towards recession would 
a) increase unemployment, prompting a decrease in tax rates or an increase in government spending, both of which would create inflation 
b) increase unemployment, prompting an increase in tax rates or a decrease in government spending, both of which would create inflation 
c) decrease tax receipts causing a budget deficit, requiring an increase in tax rates or a decrease in government spending both of which would make the recession worse 
d) decrease tax receipts causing a budget surplus, requiring an increase in government spending or a decrease in tax rates, both of which would make the recession worse 
4. "Adam Smith said 200 years ago: 'What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.' With the advent of a 'Keynesian revolution' since World War II, principles of fiscal responsibility were abandoned - in fact, they were reversed. The message of Keynesianism might be summarized as: 'What is folly in the conduct of a private family may be prudence in the conduct of the affairs of a great nation.'" The folly referred to here is 
a) deficit spending b) inflationary spending c) crippling taxation d) forced labor 
5. "The U.S. Department of Commerce has estimated that if U.S. manufacturers use metric measures, their increased ability to compete on world markets should increase exports by about $600 million and thus benefit the U.S. economy by between $1.2 billion and $1.8 billion." These numbers suggest that 
a) the multiplier is between 2 and 3 
b) imports should increase by between $1.2 and $1.8 billion 
c) exports are unlike other kinds of spending in terms of their multiplier impact 
d) it takes between $1.2 and $1.8 billion increase in income to generate a $600 million increase in exports



Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help