Question

Question 41 1 pts

The effect of the multiplier associated with an initial increase in autonomous expenditures will be:

Group of answer choices

zero if there is an increase in the price level.

lessened if inflation occurs.

enhanced if inflation occurs.

the same whether or not inflation occurs.

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Question 42 1 pts

"Discretionary" fiscal policy is so named because it:

Group of answer choices

occurs automatically as the nation's level of GDP changes.

is invoked secretly by the Council of Economic Advisors.

involves specific change in taxes and expenditures undertaken expressly for stabilization purposes at the option of Congress.

is undertaken at the option of the nation's central bank.

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Question 43 1 pts

Expansionary fiscal policy is so named because it:

Group of answer choices

is aimed at achieving greater price stability.

a involves the expansion of the money supply

necessarily expands the size of the government

is designed to expand real GDP.

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Question 44 1 pts

The effect of built-in stabilizers (non-discretionary fiscal policies) on the business cycle is to:

Group of answer choices

only help the economy when it is in a downswing (recessionary).

make rich people richer and poor people poorer.

make both upswings and downswings smaller.

make the upswings larger and the downswings smaller.

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Question 45 1 pts

A $1 increase in government purchases will likely have a greater impact on real GDP than a $1 decrease in taxes because: (HINT: Don't forget about the mpc.)

Group of answer choices

government spending increases disposable income, tax cuts do not

a portion of a tax cut will be saved.

taxes vary directly with income.

government spending increases the money supply, tax cuts do not

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Question 46 1 pts

Which are contractionary fiscal policies?

Group of answer choices

decrease in the money supply.

increase in T and decreases in G.

decrease in T and increases in G.

increase taxation (T) and government spending (G).

an increase in interest rates.

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Question 47 1 pts

Which of the following best exemplifies "crowding out"? An increase in government spending:

Group of answer choices

is financed by borrowing, raising interest rates & causing private investment to fall

forces state & local governments to spend less.

is financed by an increase in the money supply, causing inflation.

causes taxes to rise automatically, reducing consumption.

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Question 48 1 pts

After virtually being in the economic stabilization policy "deep freeze" for over 2 decades, in the early days of "Great Recession":

Group of answer choices

none are correct

supply-side economics made a comeback

Walt Disney made a comeback

fiscal policy made a comeback

monetary policy made a comeback

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Question 49 1 pts

49. As noted in class, our (simple) spending multipliers were somewhat unrealistic. The actual size of the real world (or complex) spending multiplier is equal to (approximately):

Group of answer choices

10

1.5

0

negative 1.5

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Question 50 1 pts

Using an AS/AD diagram, how would you show expansionary fiscal policy?

Group of answer choices

with a leftward shift of the AS curve

with a rightward shift of the AS curve

with a leftward shift of the AD curve

with a rightward shift of the AD curve

Answer 1

41. (c) lessened if inflation occurs.

42. (c) involves specific change in taxes and expenditures undertaken expressly for stabilization purposes at the option of Congress.

Discretionary fiscal policy refers to government policy that alters government spending or taxes. Its purpose is to expand or shrink the economy as needed.

43. (d) is designed to expand real GDP.

Expansionary fiscal policy is used to kick-start the economy during a recession. It boosts aggregate demand, which in turn increases output and employment in the economy. In pursuing expansionary policy, the government increases spending, reduces taxes, or does a combination of the two.

44. (c) make both upswings and downswings smaller.

Automatic stabilizers are a type of fiscal policy designed to offset fluctuations in a nation's economic activity through their normal operation without additional, timely authorization by the government or policymakers.

45. (b) a portion of a tax cut will be saved.

46. (b) increase in T and decreases in G.

When the government uses fiscal policy to decrease the amount of money available to the populace, this is called contractionary fiscal policy. Thus contractionary fiscal policy is when elected officials either cut spending or increase taxes.

47. (a) is financed by borrowing, raising interest rates & causing private investment to fall.

The crowding out effect is an economic theory arguing that rising public sector spending drives down or even eliminates private sector spending.

48. (c) fiscal policy made a comeback.

50. (d) with a rightward shift of the AD curve.