1.

An appropriate fiscal policy for a severe recession is: O a.a decrease in government 0 b.a decrease in tax 0 c. appreciation of the O d.an increase in interest spending. rates. dollar. rates. Which are contractionary fiscal policies? 0 a.increased taxation and O b.increased taxation and O c.decreased taxation and no 0 d. no change in taxation and increased government decreased government change in government increased government spending spending spending spending An expansionary fiscal policy is shown as a: O a. rightward shift in the economy's O b. movement along an O c. leftward shift in the O d. leftward shift in the aggregate demand existing aggregate economy's aggregate economy's aggregate curve. demand curve supply curve. demand curve.Fiscal policy is designed to: O a. Achieve full-employment. O b. Achieve zero inflation. O c. Encourage negative economic growth. O d. Neither answers a, b, or c.What is potential real GDP? 0 a.The total amount of O b. The maximum amount of goods and O c.A prediction of what an O d.The total amount of production an economy services produced without an economy economy will likely production by an produces at equilibrium. being in a recessionary or inationary produce in the future. economy adjusted for gap. inflation. We would expect a decline in personal and corporate income taxes to: O a.shift the aggregate demand curve 0 b.increase consumption and O c.increase the real 0 d.do all of the rightward. investment spending. output. above. What is a recessionary gap? 0 a.The difference 0 b. The difference between actual O c.The difference between the O d.The difference between actual between nominal and potential real GDP when quantity of goods and and potential real GDP when the and real GDP. the economy is below its services demanded and economy is above full potential. supplied. employment. How can an inflationary gap be closed? O a. By an increase in aggregate O b. By an increase in government O c. By an increase in the price O d. By an increase in demand. spending. level. taxes.A contractionary fiscal policy is shown as a: O a. rightward shift in the O b. rightward shift in the O c. movement along an existing O d. leftward shift in the economy's economy's aggregate aggregate economy's aggregate supply curve. demand curve. aggregate demand curve. demand curve.The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the: O a. crowding-out lag. O b. recognition lag. O c. operational lag. O d. administrative lag