Chapter 10

When the MPC is .75, a decrease in net taxes of $100 billion will increase the equilibrium level of real GDP by

$300 billion

If the marginal propensity to consume is 3/4, the simple multiplier is

4

If government spending increases, shifting aggregate demand from _____ to _____, aggregate output will increase from _____ to _____

AD0;Ad1:Qo;Qf

Rising productivity will increase economic growth and raise the average standard of living, shifting the _____ curve to the _____.

long-run aggregate supply; right

Which of the following is an example of contractionary fiscal policy?

reducing military spending

Automatic stabilizers are designed so that as income falls:

spending does not fall as much as income

If an expansionary policy pushes output beyond the full employment level of GDP:

the short-run aggregate supply curve will shift to the left.

_____ is the amount by which annual tax revenues exceed government expenditures.

The budget surplus

If a government collects $1,400 in tax revenue and spends $1,600, it has:

a deficit of $200

The best discretionary fiscal policy option is:

expansionary fiscal policy that leads to full employment.

One strength of the use of discretionary fiscal policy is the timing lags.

false