The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it   a. reduces investment and thereby increases consumer spending.   b. increases the money supply and thereby reduces interest rates.   c. increases income and thereby increases consumer spending.   d. decreases income and thereby increases consumer spending

Which of the following statements is FALSE?   A. An expansionary fiscal policy might consist of an increase in transfer payments,   B. An investment tax credit is an example of expansionary fiscal policy   C. An expansionary fiscal policy seeks to shift aggregate demand to the right   D. Discretionary fiscal policy is always  expansionary

Which of the following is NOT a problem associated with implementing fiscal policy. a. Policy lags b. Information lags c. Interest rate lags Od. Impact lags

Which of the following effects results from the change in the interest rate created by an increase in government spending?   a. the investment accelerator and crowding out   b. the investment accelerator but not crowding out   c. crowding out but not the investment accelerator   d. neither crowding out nor the investment accelerator

QUESTION 32 The government can use in the form of O a contractionary fiscal policy, a decrease in government spending Ob. an expansionary fiscal policy, an increase in government spending C. an expansionary fiscal policy, an increase in corporate taxes da contractionary fiscal policy, a reduction in taxes to decrease the level of aggregate demand in the economy.

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009. At that time, the president's economists estimated the multiplier to be a. 2.4 for government purchases and 1.4 for tax cuts. b. 3.2 for government purchases and 2.0 for tax cuts. c. 1.6 for government purchases and 0.4 for tax cuts. d. 1.6 for government purchases and 1.0 for tax cuts.

Can you answer this question

If the marginal propensity to consume is then the government spending multiplier is 3. True O False

The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by increasing government purchases to reduce the burden of this recession. Fiscal Policy Price Level 160 LRAS AS 140 120 100 80 60 40 20 0 AD 1 AD 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? EA billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.

A decrease in government purchases of $6 billion leads to an initial $4.5 billion decrease in withdrawals. a. In this case MPW is, MPC is, and the spending multiplier in this economy is Enter your responses for marginal propensities and multiplier values rounded to 2 decimal places. b. With this change in government purchases the AD curve shifts to the by $billion. Enter your response for the size of the curve shift rounded to 1 decimal place. Do not put a minus sign in your answer. c. As a result of this shift the equilibrium price level will (Click to select) vv and equilibrium real output will C A decrease in government purchases of $6 billion leads to an initial $4.5 billion decrease in withdrawals. MPC is a. In this case MPW is , and the spending multiplier in this economy is propensities and multiplier values rounded to 2 decimal places. Enter your responses for marginal b. With this change in government purchases the AD curve shifts to the (Click to select) by $ of the curve…