murgo part2 final

44. The $787 billion stimulus package passed in the United States in 2009 focused more on spending than on taxes partly because: A) increased spending leads to a larger increase in GDP than the same reduction in taxes. B) increased spending leads to a smaller increase in GDP than the same reduction in taxes. C) the government tax multiplier is more than the government spending multiplier. D) the government revenue multiplier is about the same as the government tax multiplier.

A) increased spending leads to a larger increase in GDP than the same reduction in taxes.

45. Most studies estimate the overall multiplier of the 2009 stimulus to be between: A) 0 and 1. B) 1.5 and 2. C) 3 and 3.5. D) 5 and 6.

B) 1.5 and 2.

41. If the marginal propensity to consume is 0.9, by how much will $100 of government spending increase GDP? A) $90 B) $100 C) $1,000 D) $900

C) $1,000

27. If the marginal propensity to save is 0.25, the multiplier is: A) 4. B) 1.33. C) 3. D) 3.33.

A) 4.

32. If the marginal propensity to consume is 0.6, then the spending multiplier is: A) 6. B) 4. C) 2.5. D) 2.

C) 2.5.

46. (Figure: Effects of Policy Shifts) If government spending increases, shifting aggregate demand from _____ to _____, aggregate output will increase from _____ to _____. A) AD1; AD0; Qf; Q0 B) AD1; AD0; Q0; Qf C) AD0; AD1; Q0; Qf D) AD0; AD1; Qf; Q0

C) AD0; AD1; Q0; Qf

28. Suppose when John's income increased from $10,000 to $15,000, his consumption increased from $3,000 to $4,500. What is the value of his marginal propensity to save? A) 0.7 B) 0.3 C) 0.2 D) 0.8

A) 0.7

35. Demand-pull inflation scenarios took place in the: A) 1960s for the United States and from 1985 to 1995 for Japan. B) 1930s for the United States and from 1985 to 1995 for Japan. C) 1960s for the United States and in the 1930s for Japan. D) 1930s for both the United States and Japan

A) 1960s for the United States and from 1985 to 1995 for Japan.

43. __________ government spending, _____ transfer payments, and ____ taxes are all examples of expansionary fiscal policy. A) Increasing; increasing; lowering B) Increasing; reducing; raising C) Reducing; increasing; lowering D) Reducing; increasing; raising

A) Increasing; increasing; lowering

33. The drop in aggregate demand that occurred during the Great Depression caused a drop in real GDP: A) and deflation. B) but an increase in the price level. C) but no change in the price level. D) but a modest rise in inflation

A) and deflation.

38. Increased taxes will shift the aggregate demand curve to the _____ and _____ output demanded. A) left; decrease B) left; increase C) right; increase D) right; decrease

A) left; decrease

48. (Figure: Determining Fiscal Policy) Expansionary fiscal policies could: A) move the economy to full employment. B) move the economy away from full employment. C) lead to a lower price level. D) lead to a lower price level and lower unemployment.

A) move the economy to full employment.

30. Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely long-run impact? A) Prices fall. B) GDP first rises, and then falls back to long-run equilibrium. C) A recession occurs. D) The impact cannot be determined from the information given.

B) GDP first rises, and then falls back to long-run equilibrium.

42. __________ government spending, _____ transfer payments, and ____ taxes are all examples of contractionary fiscal policy. A) Reducing; increasing; raising B) Reducing; reducing; raising C) Reducing; reducing; reducing D) Raising; increasing; raising

B) Reducing; reducing; raising

Use the following to answer questions 39-40: Figure: Predicting Aggregate Demand Shifts 39. (Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD1 to AD2? A) a tax increase B) a decrease in interest rates C) a decrease in government purchases D) a worsening of consumer expectations about the future

B) a decrease in interest rates

40. (Figure: Predicting Aggregate Demand Shifts) Which of the following would shift the aggregate demand curve from AD2 to AD1? A) a tax cut B) an increase in interest rates C) an increase in government purchases D) an improvement of consumer expectations about the future

B) an increase in interest rates

29. Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely short-run impact? A) recession and falling prices B) inflation and rising GDP C) recession and rising prices D) The impact cannot be determined from the information given.

B) inflation and rising GDP

50. Which economist promoted the idea that reducing tax rates can increase tax revenue? A) Robert Solow B) Adam Smith C) James Buchanan D) Arthur Laffer

C) James Buchanan

49. Which U.S. presidents reduced marginal tax rates to promote work and business risk taking? A) Obama and Reagan B) Kennedy and Clinton C) Reagan and Kennedy D) Clinton and Obama

C) Reagan and Kennedy

36. Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded. A) left; decrease B) left; increase C) right; increase D) right; decrease

C) right; increase

37. Decreased interest rates will shift the aggregate demand curve to the _____ and _____ output demanded. A) left; decrease B) left; increase C) right; increase D) right; decrease

C) right; increase

47. (Figure: Effects of Policy Shifts) If the economy starts below full employment, an expansionary fiscal policy will move the aggregate demand curve from _____ to _____, and the equilibrium will move from _____ to _____. A) AD1; AD0; a; b B) AD1; AD0; b; a C) AD0; AD1; b; a D) AD0; AD1; a; b

D) AD0; AD1; a; b

31. (Figure: Shifting the AD and SRAS) Starting in long-run equilibrium when the aggregate demand curve is AD0 and the short-run aggregate supply curve is SRAS0, if there is a supply shock, such as a drastic increase in the price of oil, this will cause _____ and a movement to a short-run equilibrium at point _____. A) a leftward shift in AD1; a B) a rightward shift in AD1; c C) a rightward shift in SRAS2; c D) a leftward shift in SRAS2; a

D) a leftward shift in SRAS2; a

34. What would cause the price level to decrease and employment to increase? A) a shift to the left of the AD curve B) a shift to the right of the AD curve C) a shift to the left of the SRAS curve D) a shift to the right of the SRAS curve

D) a shift to the right of the SRAS curve

26. In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves, what is a likely outcome? A) deflation B) higher taxes C) lower imports D) inflation

D) inflation