Econ Fiscal Policy

2. When the central bank contracts the money supply in response to expansionary fiscal policy, this is known as a. A monetary offset. b. Ricardian equivalence. c. Contractionary fiscal policy. d. The fiscal multiplier. e. b and c only. f. All of the above.

a) a monetary offset

1. Which of the following are automatic stabilizers used by the government? a. Unemployment insurance. b. Temporary tax cuts passed by Congress when bad economic news hits. c. Temporary spending increases passed by Congress when bad economic news hits. d. a and b only. e. a and c only.

a) unemployment insurance

2. If the government performs expansionary fiscal policy, which curve shifts and in what direction? a. The aggregate demand curve shifts right. b. The aggregate demand curve shifts left. c. The aggregate supply curve shifts right. d. The aggregate supply curve shifts left.

a- the aggregate demand curve shifts left

1. When consumers save a tax cut instead of spending it, this is known as: a. A monetary offset. b. Ricardian equivalence. c. Contractionary fiscal policy. d. The fiscal multiplier. e. b and c only. f. All of the above.

b) a monetary offset

2. It's often very difficult to time fiscal policy correctly. Suppose each fiscal lag identified in the video lasts approximately 3 months. If the average U.S recession since World War II lasts around 11 months, is the total fiscal lag longer or shorter than the typical recession? * a. Shorter. b. Longer.

b) longer

2. Which policy is likely to shift the AD curve more? * a. A tax increase in the same year there is a government spending increase. b. A tax increase that occurs without a government spending increase.

b) tax increase that occurs without a government spending increase

3. Given your answer above, in which direction will the AD curve shift? * a. To the right and up. b. To the left and and down. c. Cannot be determined from the information given.

b) to the left and down

2. The government increases taxes on corporations. a. Expansionary fiscal policy. b. Contractionary fiscal policy. c. Crowding out. d. Fiscal multiplier. e. a and c only. f. a and d only.

b- contractionary fiscal policy

1) Suppose a change in fiscal policy cause the AD curve to shift right/up. Which response below would most likely cause that shift? a. A rise in taxes OR a rise in government spending. b. A rise in taxes OR a fall in government spending. c. A fall in taxes OR a rise in government spending. d. A fall in taxes OR a fall in government spending.

c) A fall in taxes Or a rise in government spending

3. Given that an ideal stimulus is timely, targeted, and temporary, which of the following scenarios would most benefit from expansionary fiscal policy? * a. Consumption spending declines rapidly as many people fear a recession. b. American workers get laid off by the hundreds of thousands because of a sudden collapse in investment purchases. c. American wages have grown slowly for many years. d. a and b only. e. a and c only.

d) consumption spending declines rapidly as many people fear a recession and american workers get laid off by the hundreds of thousands because of a sudden collapse in investment purchases

3. According to the quantity theory of money, expansionary fiscal policy will do all of the following except: a. Increase inflation in the short run. b. Increase inflation in the long run. c. Increase GDP growth in the short run. d. Increase GDP growth in the long run.

d- increase GDP growth in the long run

1. Suppose there is a negative oil shock and oil prices dramatically increase. What has happened? a. The aggregate demand curve shifts right. b. The aggregate demand curve shifts left. c. The aggregate supply curve shifts right. d. The aggregate supply curve shifts left. e. a and c only.

d- the aggregate supply curve shifts left

3. The effects of expansionary fiscal policy depend on the behavior of a. Consumers. b. The Central Bank. c. Businesses. d. b and c only. e. All of the above.

e) consumers, the central bank, businesses

1. The government hires 2000 workers for new infrastructure projects. Over half of the newly hired construction workers, however, were employed in other sectors of the economy and quit their jobs to take this better paying opportunity. a. Expansionary fiscal policy. b. Contractionary fiscal policy. c. Crowding out. d. Fiscal multiplier. e. a and c only. f. a and d only.

e- expansionary fiscal policy and crowding out

4. During a recession, the government sends $500 checks to every American family. 70% of American families save the money or use it to pay off their debt. a. Expansionary fiscal policy. b. Contractionary fiscal policy. c. Crowding out. d. Fiscal multiplier. e. a and c only. f. a and d only.

e- expansionary fiscal policy and crowding out

3. During a recession, the government increases spending by $300B, which in turn increases GDP by $350B. a. Expansionary fiscal policy. b. Contractionary fiscal policy. c. Crowding out. d. Fiscal multiplier. e. a and c only. f. a and d only.

f- expansionary fiscal policy and fiscal multiplier