Eco 231 chapter 21 quiz - Assignment Essays

question

Contractionary fiscal policy is deliberate government action to influence aggregate demand and the level of real GDP through:

answer

decreasing government spending or increasing taxes.

question

According to Keynesian economics, fiscal policy should create a deficit during economic contractions.

answer

True

question

It is inflationary for government to increase spending if:

answer

the economy is at full employment.

question

A government spending and taxation policy to achieve macroeconomic goals is known as:

answer

fiscal policy.

question

Income tax collections:

answer

fall during a recession, thus reducing the severity of the recession.

question

If no fiscal policy changes are implemented to fight inflation, suppose the aggregate demand curve will exceed the current aggregate demand curve by $900 billion at any level of prices. Assuming the marginal propensity to consume is 0.90, this increase in aggregate demand could be prevented by:

answer

increasing taxes by $100 billion.

question

Suppose inflation is a threat because the current aggregate demand curve will increase by $600 billion at any price level. If the marginal propensity to consume is 0.75, federal policymakers can follow Keynesian economics and restrain inflation by:

answer

increasing tax revenues by $200 billion.

question

Automatic stabilizers create ________ during recessions from increased government spending on welfare and unemployment insurance, and reduced tax revenues, and create _________ during peak growth periods of the economy from reduced government welfare spending and increased tax revenues.

answer

fiscal stimulus, fiscal contraction

question

If the economy is experiencing unemployment, then the most appropriate government policy would be to:

answer

shift the aggregate demand curve by using a tax cut coupled with more spending.

question

Personal income taxes:

answer

make recessions and inflationary episodes less severe.

question

The marginal propensity to consume is:

answer

the change in consumption divided by the change in income.

question

A decrease in real GDP would affect the U.S. economy by:

answer

cutting tax revenues and raising government expenditures.

question

Automatic stabilizers are government programs that:

answer

shift the budget toward a deficit when the economy slows but shift it toward a surplus during an expansion.

question

The balanced budget multiplier is always equal to 1.

answer

True

question

The government is pursuing an expansionary policy if it:

answer

increases its spending and/or reduces its tax revenues.

question

A balanced budget is present when:

answer

government revenues equal government expenditures.

question

If the economy was about to enter an inflationary boom, which of the following would be the most appropriate policy?

answer

A tax increase.

question

Contractionary fiscal policy is designed to combat demand-pull inflation and consists of a decrease in government spending and/or an increase in taxes.

answer

True

question

Unemployment compensation payments:

answer

rise during a recession and thus reduce the severity of the recession.

question

The marginal propensity to save is

answer

the change in saving divided by the change in income.

question

Automatic stabilizers "lean against the prevailing wind" of the business cycle because:

answer

federal expenditures and tax revenues change as the level of real GDP changes.

question

According to the Laffer curve, the federal tax rate affects:

answer

All of these.

question

If the economy is experiencing demand-pull inflation, then the appropriate government policy would be to shift the:

answer

aggregate demand curve by using a tax increase coupled with spending cuts.

question

Automatic stabilizers combine changes in discretionary fiscal policy with changes in government spending and taxes influenced by the business cycle in order to stabilize the economy.

answer

False

question

Automatic stabilizers stabilize the level of real GDP because:

answer

federal expenditures and tax revenues change as the level of real GDP changes.

question

Equal increases in government spending and taxes will:

answer

lead to an equal increase in the equilibrium level of real GDP.

question

Expansionary fiscal policy consists of:

answer

increasing government spending.

question

An expansionary fiscal policy may include:

answer

All of these.

1 of 28

question

Contractionary fiscal policy is deliberate government action to influence aggregate demand and the level of real GDP through:

answer

decreasing government spending or increasing taxes.

question

According to Keynesian economics, fiscal policy should create a deficit during economic contractions.

answer

True

question

It is inflationary for government to increase spending if:

answer

the economy is at full employment.

question

A government spending and taxation policy to achieve macroeconomic goals is known as:

answer

fiscal policy.

question

Income tax collections:

answer

fall during a recession, thus reducing the severity of the recession.

question

answer

increasing taxes by $100 billion.

question

answer

increasing tax revenues by $200 billion.

question

answer

fiscal stimulus, fiscal contraction

question

If the economy is experiencing unemployment, then the most appropriate government policy would be to:

answer

shift the aggregate demand curve by using a tax cut coupled with more spending.

question

Personal income taxes:

answer

make recessions and inflationary episodes less severe.

question

The marginal propensity to consume is:

answer

the change in consumption divided by the change in income.

question

A decrease in real GDP would affect the U.S. economy by:

answer

cutting tax revenues and raising government expenditures.

question

Automatic stabilizers are government programs that:

answer

shift the budget toward a deficit when the economy slows but shift it toward a surplus during an expansion.

question

The balanced budget multiplier is always equal to 1.

answer

True

question

The government is pursuing an expansionary policy if it:

answer

increases its spending and/or reduces its tax revenues.

question

A balanced budget is present when:

answer

government revenues equal government expenditures.

question

If the economy was about to enter an inflationary boom, which of the following would be the most appropriate policy?

answer

A tax increase.

question

Contractionary fiscal policy is designed to combat demand-pull inflation and consists of a decrease in government spending and/or an increase in taxes.

answer

True

question

Unemployment compensation payments:

answer

rise during a recession and thus reduce the severity of the recession.

question

The marginal propensity to save is

answer

the change in saving divided by the change in income.

question

Automatic stabilizers "lean against the prevailing wind" of the business cycle because:

answer

federal expenditures and tax revenues change as the level of real GDP changes.

question

According to the Laffer curve, the federal tax rate affects:

answer

All of these.

question

If the economy is experiencing demand-pull inflation, then the appropriate government policy would be to shift the:

answer

aggregate demand curve by using a tax increase coupled with spending cuts.

question

Automatic stabilizers combine changes in discretionary fiscal policy with changes in government spending and taxes influenced by the business cycle in order to stabilize the economy.

answer

False

question

Automatic stabilizers stabilize the level of real GDP because:

answer

federal expenditures and tax revenues change as the level of real GDP changes.

question

Equal increases in government spending and taxes will:

answer

lead to an equal increase in the equilibrium level of real GDP.

question

Expansionary fiscal policy consists of:

answer

increasing government spending.

question

An expansionary fiscal policy may include:

answer

All of these.

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