Question;(TCO 6) Fiscal policy refers to the;manipulation of government spending and taxes;to stabilize domestic output, employment, and the price level.;manipulation of government spending and taxes;to achieve greater equality in the distribution of income.;altering of the interest rate to change;aggregate demand.;fact that equal increases in government;spending and taxation will be contractionary.;Question 2. Question;(TCO 6) Suppose that the economy is in the midst of a;recession. Which of the following policies would most likely end the recession;and stimulate output growth?;A Congressional proposal to incur a Federal;surplus to be used for the retirement of public debt.;Reductions in agricultural subsidies and;veterans' benefits.;Postponement of a highway construction;program.;Reductions in Federal tax rates on personal;and corporate income.;Question 3. Question;(TCO 6) The crowding-out effect of expansionary fiscal;policy suggests that;government spending increases at the expense;of private investment.;imports replace domestic production.;private investment increases at the expense of;government spending.;saving increases at the expense of investment.;Question 4. Question;(TCO 5) Which of the following would not shift the aggregate;supply curve?;An increase in labor productivity;A decline in the price of imported oil;A decline in business taxes;An increase in the price level;Question 5. Question;(TCO 6) Other things equal, a reduction in personal and;business taxes can be expected to;increase aggregate demand and decrease aggregate supply.;increase both aggregate demand and aggregate;supply.;decrease both aggregate demand and aggregate;supply.;decrease aggregate demand and increase;aggregate supply.;Question 6. Question;(TCO 6) The MPC can be defined as that fraction of a;change in income that is not spent.;change in income that is spent.;given total income that is not consumed.;given total income that is consumed.;Question 7. Question;(TCO 6) Dissaving means;the same thing as disinvesting.;that households are spending more than their;current incomes.;that saving and investment are equal.;that disposable income is less than zero.;Question 8. Question;(TCO 5) Refer to the graph. Which of the following factors;will shift AD1 to AD3?;Graph Description;An increase in expected returns on investment;An increase in productivity;A decrease in real interest rates;A decrease in consumer wealth;Question 9. Question;(TCO 6) The multiplier is;1/MPC.;1/(1 + MPC).;1/MPS.;1/(1 - MPS).;Question 10. Question;(TCO 5) The American Recovery and Reinvestment Act of 2009;was implemented primarily to;reduce inflationary pressure caused by oil price;increases.;curb the overspending by households that;contributed to the Great Recession.;bring the Federal budget back into balance.;stimulate aggregate demand and employment.;Question 11. Question;(TCO 5) What effect would each of the following have on;aggregate demand or aggregate;supply? Explain.;a. A decrease in real interest rates paid by the consumer;b. An increase in Labor Productivity as a result of a;better-educated population;Question 12. Question;(TCO 6) Why do some economists believe that tax cuts are;critical to help revive an economy experiencing a recession?
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