6 2 points Save Answer Economist John Maynard Keynes once said, "In the long run, we are all dead." Keynes was likely O in favor of using fiscal policy. O against the use of fiscal policy. O in favor of allowing the economy to always correct itself. None of these statements is true. QUESTION 7 2 points Save Answer Keynesian policy: O refers to policies that actively shift aggregate demand in an effort to reach full employment. O refers to fiscal policy. O promotes spending more and taxing less to boost economic activity to potential GDP. All of these are true. QUESTION 8 2 points Save Answer Discretionary fiscal policy is: O fiscal policy that the government actively chooses to adopt. O taxes and government spending that affect fiscal policy without specific action from policymakers. O fiscal policy that the government enacts only for a short period of time. taxes and government spending that the government actively votes against adoption.QUESTION 9 2 points Save Answer Johnny has been working a lot of overtime during the most current economic boom. As a result, his income is high enough for him to move from the 10 percent tax bracket to the 15 percent tax bracket. So, Johnny pays a higher percentage of a higher income to the government this year. The increased amount paid to the government is an example of: O A. discretionary fiscal policy slowing the economy. B. automatic stabilizers slowing the economy. C. discretionary fiscal policy encouraging economic activity. D. automatic stabilizers encouraging economic activity. O automatic stabilizers slowing the economy. O discretionary fiscal policy encouraging economic activity. O automatic stabilizers encouraging economic activity. QUESTION 10 2 points Save Answer When the U.S. economy hits a recession, fiscal policy: O automatically becomes expansionary because average tax rates go down and spending on welfare programs goes up. O is always discretionary because the government is quick to react to changes in the business cycle. O automatically becomes contractionary because average tax rates go up and spending on welfare programs goes down. automatically becomes contractionary because average tax rates go down and spending on welfare programs goes up.QUESTION 21 2 points Save Answer During a recession, government deficits can grow because: O government spending often increases as part of an expansionary fiscal policy. income tax revenues tend to decrease because people are earning less. O sales tax revenues tend to decrease because people are spending less. All of these are true. QUESTION 22 2 points Save Answer A direct cost of public debt is: O the interest the government has to pay to the people it has borrowed from. O it allows the government to be flexible when something unexpected happens. it can pay for investments that will lead to economic growth in the long run. All of these are costs to holding public debt. QUESTION 23 2 points Save Answer If interest rates increase, the government debt becomes: more expensive to pay. O less expensive to pay. more volatile. less of a burden.QUESTION 5 2 points Save Answer Price Level LRAS SRAS Pa ADA ADS AD AD YA Assuming the economy in the graph shown is currently at equilibrium A, if the government wanted to enact a policy it would likely enact: O expansionary fiscal policy in an effort to move aggregate demand to the right. O contractionary fiscal policy in an effort to move aggregate demand to the left. O expansionary fiscal policy in an effort to move aggregate demand to the left. contractionary fiscal policy in an effort to move aggregate demand to the right.QUESTION 13 2 points Save Answer For each of the following situations, use an AD/AS model to describe what happens to price levels and output in the United States in the short run. In each case assume the economy starts in long- and short-run equilibrium, and show the appropriate shifts in the AS or AD curves. a. A stock market crash reduces people's wealth. b. The spread of democracy around the world increases consumer confidence in the United States. c. The European economy crashes. d. The United States enters into an arms race with China, resulting in a significant increase in military spending. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt UN - v A v Z v IX ... P 0 WORDS POWERED BY TINYQUESTION 12 2 points Save Answer Calculate the government-spending multiplier in each of the following examples. a. The marginal propensity to consume (MPC) = 0.2. b. The marginal propensity to consume (MPC) = 0.5. c. The marginal propensity to consume (MPC) = 0.8. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial V 10pt V Ev Ev A v S V Zx X 0 Q Q ... P O WORDS POWERED BY TINYQUESTION 15 2 points Save Answer The idea that if governments cut taxes but not spending, people will not change their behavior, and expansionary policy will have little expansionary effect is known as: O Ricardian equivalence. O Keynesian policy. O the invisible hand. Ricardian countenance. QUESTION 16 2 points Save Answer The effect of government spending or tax cuts on national income is measured by the: O multiplier. O subtractor. O aggregator. O divisor. QUESTION 17 2 points Save Answer The government spending multiplier is calculated as: O 1/(1 - MPC). O -1/(1 - MPC). O -MPC/(1 - MPC). (1 - MPC) * - MPC.QUESTION 11 2 points Save Answer In a booming economy, discretionary fiscal policy: O can be added to the automatic contractionary effects of policies already in place. O often acts counter to the Paste atic stabilizers that already exist. O removes the effect of the automatic stabilizers that already are present. O All of these are true.QUESTION 24 2 points Save Answer An indirect cost of government debt is: O it can distort the credit market and slow economic growth. O it can cause hyperinflation. O it can cause unemployment below the natural rate. All of these are true. QUESTION 25 2 points Save Answer If the government increased taxes by $400, and the GDP decreased $600 as a result, the MPC must be: O 0.60. O 0.75. O -0.60. O 1.5.QUESTION 18 2 points Save Answer If the MPC is 0.9, and the government cuts spending by $200b, the overall effect on GDP will be: O a decrease of $2,000b. O an increase of $2,000b. O a decrease of $1,800b. O an increase of $180b. QUESTION 19 2 points Save Answer If the government wishes to increase GDP by $1,200b, and the MPC is 0.8, it should: O increase its spending by $240b. O decrease its spending by $240b. increase its spending by $960b. decrease its spending by $960b. QUESTION 20 2 points Save Answer If the government wishes to increase GDP by $1,200b, and the MPC is 0.8, it should: O increase taxes by $240b. O decrease taxes by $240b. O increase taxes by $300b. decrease taxes by $300b.QUESTION 2 2 points Save Answer If the government increases the income tax rate, consumers: O have less to spend and will reduce their consumption. O have more to spend and will reduce their consumption. have less to spend and will increase their consumption. have more to spend and will increase their consumption. QUESTION 3 2 points Save Answer If the government decreases the income tax rate, then: O GDP will decrease. O aggregate demand will shift left. aggregate demand will shift right. O None of these will happen when the income tax rate decreases. QUESTION 4 2 points Save Answer If the government enacts contractionary fiscal policy, it: O must want to slow economic activity. could increase taxes. O expects aggregate demand to decrease. O All of these are true.QUESTION 1 2 points Save Answer Calculate the government-taxation multiplier in each of the following examples. a. The marginal propensity to consume (MPC) = 0.2. b. The marginal propensity to consume (MPC) = 0.5. c. The marginal propensity to consume (MPC) = 0.8. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt V V v A v . .. P 0 WORDS POWERED BY TINYQUESTION 14 2 points Save Answer For each of the following shocks, say whether it is a demand-side shock or a supply-side shock. [LO 28.2, 28.4] a. Consumer confidence falls. b. Government spending increases. c. The price of foreign goods increases. d. The price of oil increases. e. A cyclone destroys manufacturing plants. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial V 10pt V V v A v VTX ... P 0 WORDS POWERED BY TINY