1. The government of Xela is considering a number of policy options. Which of the following options would decrease gross domestic product (GDP) 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 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.

2. Which of the following are fiscal policy options? I. Changing tax rates II. Changing government spending III. Changing the money supply (A) I only (B) II only (C) III only (D) I and II only (E) I,II and III

3. Contractionary fiscal policy refers to (A) using a decrease in the money supply to lower inflation (B) using higher tax rates to lower inflation (C) using more government spending to lower unemployment (D) using an increase in the money supply to lower unemployment (E) using a decrease in the money supply to increase inflation

4. Expansionary fiscal policy is intended to (A) increase inflation and decrease employment (B) decrease inflation and increase unemployment (C) increase gross domestic product (GDP) and decrease unemployment (D) decrease unemployment and decrease output (E) decrease unemployment and keep output unchanged

5. 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

6. A progressive tax rate acts as ___ when the gross domestic product (GDP) is high and ___ when GDP is low. (A) expansionary monetary policy; contractionary fiscal policy (B) contractionary fiscal policy; expansionary fiscal policy (C) contractionary fiscal policy; expansionary monetary policy (D) contractionary fiscal policy; contractionary fiscal policy (E) expansionary fiscal policy; contractionary monetary policy