Question 1

The most likely explanation for why the U.S. government was not worried about the growth in deficits caused by expansionary policy was they:

Accepted Answer

A) wanted inflation to occur in order to wipe out the value of government debt. 
B) knew they could pass significant tax increases to manage the deficit. 
C) expected that the economy would grow out of the deficit. 
D) wanted to make the dollar exchange rate favorable compared to the Yuan. 
A) wanted inflation to occur in order to wipe out the value of government debt. 
B) knew they could pass significant tax increases to manage the deficit. 
C) expected that the economy would grow out of the deficit. 
D) wanted to make the dollar exchange rate favorable compared to the Yuan.

Question 2

Refer to the graph shown. Economic output in year 0 is $50 billion. What is potential output in year 2?

Accepted Answer

A) $50 billion 
B) $51.5 billion 
C) $53.0 billion 
D) $54.6 billion 
A) $50 billion 
B) $51.5 billion 
C) $53.0 billion 
D) $54.6 billion

Question 3

In the graph shown, what would shift the WAS curve from WAS0 to WAS1?

Accepted Answer

A) The country's exchange rate appreciates. 
B) Domestic reservation wages fall. 
C) Input prices fall. 
D) Government runs contractionary policy. 
A) The country's exchange rate appreciates. 
B) Domestic reservation wages fall. 
C) Input prices fall. 
D) Government runs contractionary policy.

Question 4

The structural stagnation hypothesis provides a general explanation for why:

Accepted Answer

A) the economy is experiencing a weak recovery. 
B) a bubble occurred in the housing market. 
C) demand-side policies have been successful in the economic recovery in 2010-12. 
D) the economy is experiencing such a strong recovery. 
A) the economy is experiencing a weak recovery. 
B) a bubble occurred in the housing market. 
C) demand-side policies have been successful in the economic recovery in 2010-12. 
D) the economy is experiencing such a strong recovery.

Question 5

A theory in which advanced countries stop growing because investment opportunities would be eliminated is referred to as:

Accepted Answer

A) structural stagnation. 
B) frictional stagnation. 
C) reservation stagnation 
D) secular stagnation. 
A) structural stagnation. 
B) frictional stagnation. 
C) reservation stagnation 
D) secular stagnation.

Question 6

Which of the following would make the effects of globalization worse for the United States?

Accepted Answer

A) China and India move up the value-added chain. 
B) China and India move down the value-added chain. 
C) China and India raise the value of their currencies. 
D) Wages in China and India rise, leading to more outsourcing. 
A) China and India move up the value-added chain. 
B) China and India move down the value-added chain. 
C) China and India raise the value of their currencies. 
D) Wages in China and India rise, leading to more outsourcing.

Question 7

Would you be more likely to advise expansionary fiscal policy in a structural stagnation or in a standard recession? Why?

Accepted Answer

I would be more likely to advise expansi

Question 8

Refer to the graph shown. What will reduce the trade deficit?

Accepted Answer

A) The AD curve shifts to the left. 
B) The SAS curve shifts down. 
C) The WAS curve shifts up. 
D) All the answers are correct. 
A) The AD curve shifts to the left. 
B) The SAS curve shifts down. 
C) The WAS curve shifts up. 
D) All the answers are correct.

Question 9

Under the standard macro policy, the long-run trend growth rate is assumed to be:

Accepted Answer

A) 1 to 2 percent. 
B) 5 to 6 percent. 
C) 3 to 3.5 percent. 
D) 0 to 1 percent. 
A) 1 to 2 percent. 
B) 5 to 6 percent. 
C) 3 to 3.5 percent. 
D) 0 to 1 percent.

Question 10

In the graph shown, what could balance the trade deficit (reduce domestic consumption)?

Accepted Answer

A) Contractionary monetary policy 
B) Lower domestic wages 
C) A hurricane that damages domestic manufacturing plants 
D) Expansionary fiscal policy 
A) Contractionary monetary policy 
B) Lower domestic wages 
C) A hurricane that damages domestic manufacturing plants 
D) Expansionary fiscal policy

Question 11

According to the text,how does structural stagnation differ from secular stagnation?

Accepted Answer

The difference between the two is what c

Question 12

Would a person in a developed country be better off in an industry producing commodities or an industry producing specialized goods when globalization is occurring?

Accepted Answer

A person in a developed country would ra

Question 13

How does the world supply curve change if a country's inflation is lower than the world's inflation?

Accepted Answer

If a country's inflation is lo

Question 14

According to the structural stagnation hypothesis, the expansionary policy carried out by the government led to the illusion that the policies were:

Accepted Answer

A) leading to long-term economic health. 
B) effective in reducing the trade deficit. 
C) improving U.S comparative advantages. 
D) causing goods inflation. 
A) leading to long-term economic health. 
B) effective in reducing the trade deficit. 
C) improving U.S comparative advantages. 
D) causing goods inflation.

Question 15

The gap between a country's potential output and its consumption is most directly related to its:

Accepted Answer

A) budget deficit. 
B) trade deficit. 
C) exchange rate. 
D) comparative advantage. 
A) budget deficit. 
B) trade deficit. 
C) exchange rate. 
D) comparative advantage.

Question 16

The government can deal with the effects of the decline in wealth, without causing new problems down the road.

Accepted Answer

A) True 
 B)False

Question 17

The U.S. economy is currently experiencing a standard business cycle.

Accepted Answer

A) True 
 B)False

Question 18

What is the difference between the structural stagnation hypothesis and the secular stagnation theory?

Accepted Answer

A) Structural stagnation sees globalization as the cause of a stagnation, while secular stagnation sees too little investment as the cause. 
B) Structural stagnation sees too little investment as the cause of a stagnation, while secular stagnation sees globalization as the cause. 
C) Structural stagnation sees foreign countries moving down the value-added chain as the cause of a stagnation, while secular stagnation sees foreign countries moving up the value-added chain as the cause of a stagnation. 
D) There is no difference, they both attribute stagnation to too little investment. 
A) Structural stagnation sees globalization as the cause of a stagnation, while secular stagnation sees too little investment as the cause. 
B) Structural stagnation sees too little investment as the cause of a stagnation, while secular stagnation sees globalization as the cause. 
C) Structural stagnation sees foreign countries moving down the value-added chain as the cause of a stagnation, while secular stagnation sees foreign countries moving up the value-added chain as the cause of a stagnation. 
D) There is no difference, they both attribute stagnation to too little investment.

Question 19

The international adjustments, which will help the U.S. economy out of a structural stagnation, include:

Accepted Answer

A) running expansionary policies to shift the aggregate demand curve to the right. 
B) hiring workers in the government sector to boost employment. 
C) extending unemployment compensation to replace income for unemployed workers. 
D) depreciating the value of the dollar. 
A) running expansionary policies to shift the aggregate demand curve to the right. 
B) hiring workers in the government sector to boost employment. 
C) extending unemployment compensation to replace income for unemployed workers. 
D) depreciating the value of the dollar.

Question 20

In the figure shown,

Accepted Answer

A) there is a trade deficit because of globalization. 
B) there is a trade surplus, because actual output equals potential output. 
C) there is a trade balance, because the world price level equals the domestic price level. 
D) the country isn't exporting or importing because world and domestic prices are equal. 
A) there is a trade deficit because of globalization. 
B) there is a trade surplus, because actual output equals potential output. 
C) there is a trade balance, because the world price level equals the domestic price level. 
D) the country isn't exporting or importing because world and domestic prices are equal.

Exam 37: Structural Stagnation and Globalization

The most likely explanation for why the U.S. government was not worried about the growth in deficits caused by expansionary policy was they:

Refer to the graph shown. Economic output in year 0 is $50 billion. What is potential output in year 2?

In the graph shown, what would shift the WAS curve from WAS0 to WAS1?

The structural stagnation hypothesis provides a general explanation for why:

A theory in which advanced countries stop growing because investment opportunities would be eliminated is referred to as:

Which of the following would make the effects of globalization worse for the United States?

Would you be more likely to advise expansionary fiscal policy in a structural stagnation or in a standard recession? Why?

Refer to the graph shown. What will reduce the trade deficit?

Under the standard macro policy, the long-run trend growth rate is assumed to be:

In the graph shown, what could balance the trade deficit (reduce domestic consumption)?

According to the text,how does structural stagnation differ from secular stagnation?

Would a person in a developed country be better off in an industry producing commodities or an industry producing specialized goods when globalization is occurring?

How does the world supply curve change if a country's inflation is lower than the world's inflation?

According to the structural stagnation hypothesis, the expansionary policy carried out by the government led to the illusion that the policies were:

The gap between a country's potential output and its consumption is most directly related to its:

The government can deal with the effects of the decline in wealth, without causing new problems down the road.

The U.S. economy is currently experiencing a standard business cycle.

What is the difference between the structural stagnation hypothesis and the secular stagnation theory?

The international adjustments, which will help the U.S. economy out of a structural stagnation, include:

In the figure shown,

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Macro Policy in Developing Countries

Filters

In the graph shown, what would shift the WAS curve from WAS₀ to WAS₁?