The overall effects of contractionary fiscal policy are a __________ in income, _________ in money demand, ____________ in the interest rate and a ________ in investment. a decrease, decrease, increase, decrease. b decrease, decrease, decrease, increase. c decrease, decrease, decrease, decrease. d none of the listed options. e decrease, increase, decrease, increase.

G= Government spending Tax revenues Real GDP $160 $100 $500 $160 $120 $600 $160 $140 $700 $160 $160 $800 $160 $180 $900 a) If GDP is $600, while full-employment GDP is $700, how large is the current budget deficit? How large is the structural budget deficit? b) Is Averna's current fiscal policy expansionary or contractionary? How can you tell? What would you expect to happen to GDP over the long run?

07. What factors make an expansionary "stimulus" fiscal policy effective? One answer     a) A government budget deficit associated with fiscal stimulus should should borrow money from those who spend less and save more, to those who spend more and save less.     b) A permanent decrease in taxes is more effective in stimulating spending than a temporary one     c) An increase in government purchases of goods and services should be temporary and should not permanently displace private spending     d) The most expansionary way of financing the budget deficit associated with a fiscal stimulus policy is by the central bank expanding the quantity of money in circulation.     e) Infrastructure investment belongs with long-term growth policy, but invariably makes a poor element in stimulus policy because such investment normally take a long time to implement.     f) All the above

Suppose the government implements fiscal consolidation by cutting spending while the nominal interest rate is already at zero or near zero percent. Given πeequals to π ̅ , fiscal consolidation will likely lead to:   a. Increasing inflation, decreasing real interest rate and a recession   b. Increasing inflation and real interest rates, and a recession   c. Deflation spiral, decreasing real interest rate and a recession   d. Deflation spiral, increasing real interest rate and a recession   e. All of the answers here are incorrect

Only D, E, F

Suppose the government decides to decrease taxes in an effort toincrease consumer spending and investment in the economy.(a) Will this plan succeed in accomplishing both goals?(b) In equilibrium, what happens to interest rates as a result of this action?(c) Would you characterize this as a case of fiscal crowding out? Explain.

The economy is experiencing negative GDP growth and high unemployment.  Which fiscal policy action should the government implement in an attempt to fix this problem?     A.) increase spending B.) raise taxes C.) increase the reserve requirement D.) decrease interest rates

One criticism of the fiscal policy ineffectiveness is because: A.the velocity of money is predictable. B.it is dependent on Congress' approval. C.the crowding-out effect increases investment. D.prices and wages are sticky in the short run.

1. Which of the following is an example of an automatic stabilizer? The savings Unemployment benefits Autonomous public expenditure The multiplier effect

An economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.