Macroeconomics Final Study

Automatic stabilizers refer to A) changes in the money supply and interest rates that are intended to achieve macroeconomic policy objectives. B) changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C) government spending and taxes that automatically increase or decrease along with the business cycle. D) the money supply and interest rates that automatically increase or decrease along with the business cycle.

C

Expansionary fiscal policy involves A) increasing taxes or decreasing government purchases. B) increasing the money supply and decreasing interest rates. C) increasing government purchases or decreasing taxes. D) decreasing the money supply and increasing interest rates.

C

Fiscal policy is determined by A) the Federal Reserve. B) Congress and the Federal Reserve. C) Congress and the president. D) the president and the Federal Reserve.

C

Refer to Figure 16-1. An increase in taxes would be depicted as a movement from ________, using the static AD-AS model in the figure above. A) B to C B) E to B C) B to A D) A to B E) C to D

c

The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of A) automatic stabilizers. B) discretionary fiscal policy. C) discretionary monetary policy. D) automatic monetary policy.

A

An increase in government purchases will increase aggregate demand because A) the decline in the price level will increase demand. B) government expenditures are a component of aggregate demand. C) the decline in the interest rate will increase demand. D) consumption expenditures are a component of aggregate demand.

B

Fiscal policy refers to changes in A) federal taxes and purchases that are intended to fund the war on terrorism. B) federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. D) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.

B

Which of the following is an example of discretionary fiscal policy? A) an increase in income tax receipts with rising income during an expansion B) a decrease in food stamps issued during an expansion or boom C) an increase in unemployment insurance payments during a recession D) the tax cuts passed by Congress in 2001 to combat the recession

D