Econ quiz 7

An economy has an output gap of $100,000. If the MPC in an economy is 0.8, whatchange in spending is necessary to close this gap?

$20,000

Based on your answer to the previous question, the MPS is

0.25

A household's income rises from $30,000 to $46,000. Its consumption rises from$27,000 to $39,000. Find the MPC.

0.75

Expansionary fiscal policy will cause the

AD shift right

Automatic stabilizers have which advantage over discretionary fiscal policy?

Automatic stabilizers work faster

Which of the following is an example of an automatic stabilizer?

During a recession, more people file for unemployment benefits.

Discretionary fiscal or monetary policy is more consistent with

Keynesian theory

Current real GDP is $100. Potential real GDP is $50. If the government wishes to use fiscal policy, it should run a

budget surplus

If government spending pushes up equilibrium interest rates in the market, this isreferred to as

crowding out effect

Which of the following would be most effective to stabilize the economy during arecession?

decreasing taxes

If people become anxious about the future economy, we expect the MPS to

increase