Which of the following is not a weakness of fiscal policy? O a. Fiscal policy might have undesirable long-term effects on short-run aggregate supply. O b. Time lags in fiscal policy are long and variable. O c. Fiscal policy works only during periods of stagflation. d. Implementation of policy is difficult. e. Fiscal policy often affects only current income, but many economic decisions are made on the basis of permanent income.
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Q: Suppose that the MPC is 0.80 and there is an AD excess of $1,200 million. Which of the following is…
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- Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?Which of the following is carried out in an expansionary fiscal policy? O a. Higher taxes and lower government expenditure O b. Lower taxes and higher government expenditure O c. Higher taxes and higher government expenditure O d. Lower taxes and lower government expenditure.Which of the following would be classed as an expansionary fiscal policy? O A. An increase in the money supply Ов. A reduction in the number of goods exempted from VAT An increase in government taxation OD. An increase in government expenditure
- The graph below shows real GDP levels over time. Answer the following questions based on this graph. Real GDP Business Cycle A Time a. At time T, what is the economy experiencing? O an economic expansion O full-employment output O an economic contraction b. In order to smooth out the business cycle, what type of fiscal policy should the government undertake? O expansionary fiscal policy O contractionary fiscal policy c. What type of actions might the government take? O a decrease in taxes and an increase in government purchases O an increase in taxes and a decrease in government purchases O a decrease in both taxes and government purchases. O an increase in both taxes and government purchasesThe graph below depicts the full-employment level of output and the actual level of real GDP. Real GDP Business Cycle 01 2 3 4 5 Year 6 7 8 9 Y* (9,55) 10Which of the following statements is true? O A balanced budget would not affect income because an increase in government spending is exactly matched by an increase in taxes. OIf crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more" than indicated by the government spending multiplier. O When aggregate expenditures are greater than real GDP, there will be inventory accumulation. O The flatter the aggregate supply curve, the less the amount of government spending necessary to close a $1 billion GDP gap.
- se. uestion 27 A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract. O A. true. O B. false.Which of the following would be classed as an expansionary fiscal policy? O An increase in the money supply O A reduction in the number of goods exempted from VAT O An increase in the VAT rate O An increase in government expenditureWhich of the following is not a predicted outcome of implementing automatic fiscal policy? О а. Reduces the size of the multiplier O b. Helps prevent inflation due to inflationary gaps O C. Moderates the business cycle O d. Decreases the deficit O e. Reduces the effects of economic shocks
- Which of the following statements is true of government spending? O An increase in government spending raises the equilibrium level of income by a multiple of the original spending increase. O Government spending is a part of monetary policy, not fiscal policy. O A decline in government spending brings about an expansion in the economy. O An increase in government spending increases the recessionary gap in the economy. An increase in government spending shifts the aggregate demand curve downward by a fraction of the rise in governiment spending.When is the effect of fiscal policy on real GDP the highest? O a. Steep SRAS curve, Small multiplier O b. Flat SRAS curve, Small multiplier c. Steep SRAS curve, Large multiplier d. Flat SRAS curve, Large multiplierWhich of the following is a FALSE statement? O A. Discretionary monetary policy is faster to implement than discretionary fiscal policy. B. Discretionary fiscal and monetary policies can be used to deal with a recessionary gap. O C. Discretionary fiscal policy is faster to implement than discretionary monetary policy. D. Discretionary fiscal policy transmits more quickly than discretionary monetary policy. E. Discretionary monetary policy transmits more slowly than discretionary fiscal policy.