Question

1. The natural rate of unemployment is:

a. the unemployment rate at which the economy is producing its potential GDP. b. usually equal to 3 percent. c. equal to the seasonal unemployment. d. defined by the government. e. the unemployment rate when none of the work force is unemployed for more than six weeks.

2. If the economy is already producing at its potential, _____.

a. the spending multiplier is less than 1/(1 - MPC) in the long run b. the aggregate demand curve is horizontal c. the spending multiplier equals 1/(1 - MPC) in the long run d. the spending multiplier equals zero in the long run e. the spending multiplier is more than 1/(1 - MPC) in the long run

3. Which of the following is true of the federal budget?

a. The federal budget is a plan for federal government outlays and revenues for a specified period, usually a year. b. The federal budget is a plan that describes the president’s take on the economy. c. The federal budget is a plan that describes a government’s fiscal policy for the current financial year. d. The federal budget is a plan that describes a government’s monetary policy for the current financial year. e. The federal budget is a plan that describes the eligibility criteria of the major entitlement programs taken up by Congress for the current financial year.

4. The problem with a detailed federal government budget is that:

a. it reduces the flexibility of discretionary fiscal policy. b. there is a short review period, resulting in poor choices in funding programs. c. there is a shortage of congressional committees that deal with the budget. d. monetary policy becomes more difficult to implement. e. Congress cannot keep it up to date.

Answer 1