Macroeconomics Module 34 Video Quiz Gonzaga

Taxes increase as real GDP rises. This is an example of an automatic stabilizer

true

If policy makers want to increase real GDP by $100 billion and the marginal propensity to consume is 0.75, they should __ taxes by __

decrease, more than $25 billion

The MPC is equal to 0.9 and the government increases spending by $200 billion. This increase in spending is financed by a $200 billion increase in taxes. As a result real GDP will

increase by $200 billion

The multiplier effect of changes in government purchases of goods and services is equal to:

1 / (1 - MPC)

Discretionary fiscal policy entails:

Using government spending or tax policy to affect aggregate demand

If the marginal propensity to consume is 0.9, then the tax multiplier will be:

less than 10

A change in taxes shifts the aggregate demand curve by __ than a change in government spending for goods and services and has a __ effect on real GDP

less; smaller