Practice Fiscal Policy Questions

Stagflation happens when A: inflation and unemployment both rise B: inflation rises and unemployment falls C: inflation falls and unemployment rises D: inflation and unemployment both fall

A

To close an expansionary gap A: the aggregate demand curve should be shifted to the left B: the aggregate demand curve should be shifted to the right C: the aggregate supply curve should be shifted to the left D: the aggregate supply curve should be shifted to the right

A

If MPC = 0.8 and government spending increases by $40 billion, what is the change in real GDP? A: $0 B: $200 billion C: $160 billion D: $40 billion

B

To close an expansionary gap A: the aggregate demand curve should be shifted to the left B: the aggregate demand curve should be shifted to the right C: the aggregate supply curve should be shifted to the left D: the aggregate supply curve should be shifted to the right

B

A fiscal deficit occurs when A: imports exceed exports B: exports exceed imports C: tax revenues exceed spending D: spending exceeds tax revenues

C

If MPC = 0.8 and government lowers taxes by $40 billion, what is the change in real GDP? A: $0 B: $200 billion C: $160 billion D: $40 billion

C

To remedy inflation, the appropriate fiscal policy is to have A increased taxes and government spending B: decreased taxes and government spending C: increased taxes and decreased government spending D: decreased taxes and increased government spending

C

A fiscal deficit occurs when A: imports exceed exports B: exports exceed imports C: tax revenues exceed spending D: spending exceeds tax revenues

D

If MPC = 0.8, government spending increases by $40 billion and the government increases taxes by $40 billion, what is the change in real GDP? A: $0 B: $200 billion C: $160 billion D: $40 billion

D

To remedy recession, the best fiscal policy would be to call for A: increased taxes and government spending B: decreased taxes and government spending C: increased taxes and decreased government spending D: decreased taxes and increased government spending

D