Quiz 8 Macroeconomics
You are given the following information about aggregate demand at the existing price level for an economy. (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here? a. increase government spending and taxes b. decrease government spending and taxes c. decrease government spending and increase taxes d. increase government spending and decrease taxes
c. decrease government spending and increase taxes
Actions by the Federal Government that decrease the progressivity of the tax system: a. decrease the amount of government spending b. increase the effect of automatic stabilizers c. decrease the effect of automatic stabilizers d. increase the multiplier effect
c. decrease the effect of automatic stabilizers
The goal of expansionary fiscal policy is to increase: a. the price level b. aggregate supply c. real GDP d. unemployment
c. real GDP
As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system: a. increases crowing out in the economy b. decreases real interest rates in the economy c. offsets the timing problem for fiscal policy d. serves as an automatic stabilizer for the economy
d. serves as an automatic stabilizer for the economy
Fiscal policy is enacted through changed in: a. interest rates and the price level b. the supply of money and foreign exchange c. unemployment and inflation d. taxation and government spending
d. taxation and government spending
When the Federal Government takes budgetary action to stimulate the economy or rein in inflation, such policy is: a. Active Monetary Policy b. Automatic Fiscal Policy c. Discretionary Fiscal Policy d. Active Federal Policy
c. Discretionary Fiscal Policy
If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the: a. economy's MPS is small b. economy's MPS is large c. economy's MPC is small d. Unemployment rate is low
a. economy's MPS is small
When the Federal Government uses taxation and spending actions to stimulate the economy it is conducting: a. fiscal policy b. incomes policy c. monetary policy d. employment policy
a. fiscal policy
Due to automatic stabilizers, when the nation's total income rises, government transfer spending: a. increase and tax revenue decrease b. decrease and tax revenues increase c. and tax revenues decrease d. and tax revenues increase
b. decrease and tax revenues increase
If congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n): a. supply-side fiscal policy b. expansionary fiscal policy c. contractionary fiscal policy d. nondiscresionary fiscal policy
b. expansionary fiscal policy