1. In the nation of Ile the marginal propensity to consume is 0.8. If there is no crowding out effect, what will be the impact on gross domestic product (GDP) of a $20 million increase in government spending? (A) $20 million increase (B) $2 million increase (C) $80 million increase (D) $100 million increase (E) $160 million increase

2. In the nation of Ile the marginal propensity to consume is 0.8. It lle increases its taxes by $20 million, what will be the impact on gross domestic product (GDP) as a result of these taxes? (A) GDP will increase by 0.8%. (B) GDP will increase by $80 million. (C) GDP will decrease by $80 million. (D) GDP will decrease by 0.8%. (E) An increase in taxes has no effect on GDP. 382. In the nation of Ile the marginal propensity to consume is 0.8.

3. In the nation of Ile the marginal propensity to consume is 0.8. To pay for $20 million in new government spending, the government of Ile collects $20 million in new taxes. What is the final effect of this spending on gross domestic product (GDP)? (A) $2 million decrease (B) $180 million increase (C) $80 million increase (D) $100 million increase (E) $20 million increase

4. The government of Xela is considering a number of policy options. Which of the following options would decrease gross domestic product (GDP) by the largest amount? (A) The government increases spending with no change in the taxes collected. (B) The government increases spending, which it pays for with an equal amount of new taxes collected. (C) The government decreases spending and matches this with a decrease in taxes of an equal amount. (D) The government decreases spending and does not change the amount of taxes collected. (E) The government decreases spending while increasing the amount of taxes collected.

5. Jacksonia is experiencing a rate of unemployment that is higher than the natural rate of unemployment. Which of the following statements is true? (A) The government may decrease government spending, which would increase output and decrease unemployment. (B) The government may increase taxes, which would increase output and decrease unemployment. (C) The government may increase government spending, which would increase output and decrease unemployment. (D) The government may decrease taxes, which would decrease output and decrease unemployment. (E) The government may decrease taxes, which would decrease output and increase unemployment.

6. An example of an automatic stabilizer is (A) a discretionary decrease in taxes when unemployment is high (B) a nondiscretionary increase in taxes when unemployment is high (C) a nondiscretionary decrease in government spending when unemployment is high (D) a nondiscretionary decrease in government spending when unemployment is low (E) a discretionary decrease in government spending when unemployment is low