Question 40 How is the effect of expansionary fiscal policy depicted in an aggregate supply-aggregate demand graph? O The aggregate supply curve shifts rightward. O The aggregate demand curve shifts rightward. O The equilibrium level of income increases, but neither curve shifts. O The aggregate supply curve shifts leftward.

Question 40 How is the effect of expansionary fiscal policy depicted in an aggregate supply-aggregate demand graph? O The aggregate supply curve shifts rightward. O The aggregate demand curve shifts rightward. O The equilibrium level of income increases, but neither curve shifts. O The aggregate supply curve shifts leftward.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 5P

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Which 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.
Which of the following statements is not true? A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments. O Automatic stabilizers act to moderate business cycles primarily through the personal income and consumption channels. O Other things equal, the steeper the slope of the aggregate supply curve, the less effective will be the expansionary fiscal policy. When aggregate expenditure (AE) exceed Real GDP, inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.
* Question Completion Status: YA Moving to another question will save this response. Question 7 Which of the following fiscal policy changes would be the most contractionary? O A. a $40 billion increase in taxes. O B. a $30 billion increase in taxes and a $10 billion cut in government spending. O C. a $20 billion increase in taxes and a $20 billion cut in government spending. O D.a $10 billion increase in taxes and a $30 billion cut in government spending. A Moving to another quastion willsve this responso
QUESTION 6 In the diagram below, what would happen if the government were to increase spending on goods and services? CWJ W O a. The line marked W would shift downwards and national income would move towards its equilibrium level O b. The line marked J would shift upwards and national income would move towards its equilibrium level O c. The line marked W would shift upwards and national income would move towards its equilibrium level O d. The line marked J would shift downwards and national income would move towards its equilibrium level
Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 6 on4m21 3 Tax Revenue B Tax Size Refer to Figure 8-23. If the economy is at point A on the curve, then a small increase in the tax rate will O increase the deadweight loss of the tax and increase tax revenue. O increase the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and increase tax revenue. O decrease the deadweight loss of the tax and decrease tax revenue.
What could cause the following shift? O Increase in GDP. O Expansionary fiscal policy. O Decrease in future MPK. All of the above. FE IS LM
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. b. Time lags in fiscal policy are long and variable. c. Fiscal policy works only during periods of stagflation. O 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.
Why does a $1 increase in government purchases lead to more than a $1 increase in income and spending? OA. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to a decrease in induced spending OB. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to a decrease in induced spending OC. Through the government purchases multiplier, the $1 increase in government spending will lead to an increase in aggregate demand and national income, which will lead to an increase in induced spending OD. Through the government purchases multiplier, the $1 increase in government spending will lead to a decrease in aggregate demand and national income, which will lead to an increase in induced spending
A Moving to another question will save this response. Quèstion 16 If the MPC in the economy is 0.75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion. O A. true. O B. false. A Moving to another question will save this response.
|An economy is in a below full-employment equilibrium. What is the effect on aggregate demand and real GDP, and the price level of fiscal stimulus that returns the economy to full employment? What is an example of fiscal stimulus that returns the economy to full employment from a below full-employment equilibrium? Fiscal stimulus that returns the economy to full employment _______ aggregate demand and real GDP, and the price level _______. A. increases; falls B. decreases; falls C. does not change; does not change D. increases; rises The fiscal stimulus that returns the economy to full employment from a below full-employment equilibrium _______. A. could be an increase in government expenditure and an equal increase in taxes B. could be a decrease in government expenditure and an equal decrease in taxes C. must be a decrease in taxes D. must be an increase in government expenditure
QUESTION 20 Consider an economy that is producing an aggregate output of Y2 shown in the figure below. The economy fäces can be closed by Aggregate price level which fiscal policy. LRAS SRAS AD2 AD1 AD Y2 Yp Y1 Real GDP Oa. an inflationary gap; expansionary O b-a recessionary gap; expansionary Oc a recessionary gap; contractionary O d an inflationary gap; contractionary
Quèstion 14 Which of the following fiscal policy changes would be the most contractionary? O A. a $10 billion increase in taxes and a $30 billion cut in government spending. O B. a $40 billion increase in taxes. O C, a $30 billion increase in taxes and a $10 billion cut in government spending. Opa $20 billion increase in taxes and a $20 billion cut in government spending.