Economics Chapter 13 & 15 Quiz
Assume the marginal propensity to consume is 0.8 and potential output is $800 billion. If actual real GDP is $700 billion, which of the following policies would bring the economy to potential output?
Decrease taxes by $25 billion.
Monetary policy refers to
changes in the money supply to achieve particular economic goals.
If policy makers want to decrease real GDP by $100 billion and the marginal propensity to consume is 0.6, they should _____ government purchases of goods and services by _____
decrease; $40 billion
Consumer spending will likely rise if:
government transfers rise.
If interest rates rise, there will be a(n):
increase in aggregate demand.
An expansionary fiscal policy either _____ government spending or _____ taxes.
increases; decreases
To try to eliminate a recessionary gap the Fed typically__________ the money supply, and to try to eliminate an inflationary gap the Fed typically __________ the money supply.
increases; decreases
The multiplier effect of changes in government transfers is:
less than the multiplier effect of a change in government spending.
The government budget balance equals taxes _____ purchases _____ transfers.
minus; minus
The multiplier effect of changes in government purchases of goods and services is equal to:
1 / (1 - MPC).