True/False
Indicate whether the
statement is true or false.
|
|
|
1.
|
The marginal propensity to consume is the portion of income that a household
saves after taxes.
|
Multiple Choice
Identify the
choice that best completes the statement or answers the question.
|
|
|
2.
|
The Keynesian recommendation for a policy response to a recession consists
of
a. | increased government spending with tax cuts. | b. | decreased government
spending with tax cuts. | c. | increased government spending with tax
increases. | d. | decreased government spending with tax increases. |
|
|
|
3.
|
The overall boost to economic activity that results from a government spending
increase is called a(n)
a. | butterfly effect. | b. | economic effect. | c. | multiplier
effect. | d. | aggregate demand effect. |
|
|
|
4.
|
During a recession, government spending to push up output and reduce
unemployment is called
a. | inflationary. | b. | stimulative. | c. | deflationary. | d. | a fiscal
devaluation. |
|
|
|
5.
|
The _____ is the overall economic effect that comes from government spending
increases.
a. | incentive effect | b. | spending effect | c. | multiplier
effect | d. | fiscal effect |
|
|
|
6.
|
If the spending multiplier is 1.2, then a $100 billion increase in government
spending will increase private sector spending by
a. | $100 billion. | b. | $120 billion. | c. | $83.3
billion. | d. | $20 billion. |
|
|
|
7.
|
An increase in government spending is more likely to have a positive impact on
jobs and output when
a. | the unemployment rate is below the natural rate. | b. | real GDP is above
potential GDP. | c. | the business cycle is near the peak. | d. | the economy is in a
recession. |
|
|
|
8.
|
Because of automatic stabilizers, government budget deficits are
a. | positive during both expansions and contractions | b. | negative during both
expansions and contractions | c. | zero if averaged out over the entire business
cycle | d. | larger during expansions and smaller during contractions | e. | smaller during
expansions and larger during contractions |
|
|
|
9.
|
In 1982 the U.S. was in a serious recession. President Reagan in 1982
increased defense spending and cut income taxes. This was a classic example of:
a. | expansionary fiscal policy. | b. | contractionary fiscal
policy. | c. | expansionary monetary policy. | d. | contractionary monetary
policy. |
|
|
|
10.
|
Time lags suggest that:
a. | increases in spending to fight a recessionary gap can be timed
correctly. | b. | increases in spending to fight a recessionary gay may occur too
early. | c. | increases in spending to fight a recessionary gap may occur too
late. | d. | none of the above is correct |
|