According to Keynes, the level of economic activity is predominantly determined by the level of Multiple Choice O Interest rates. O Aggregate supply. O Unemployment. O Aggregate demand.AS A01 - .2 g a D E E\" E E PF ______ '-' | I | I | I | I | I | I II 5.8 6.0 6.2 Qr Real Output (trillions of dollars per your) Figure 11.1 Refer to F|gure11.1.A55urne aggregate demand is represented by A01 and fullemployment output Is $6.0 tr|ll|on. The economy confronts a real GDP gap of MU lple Choice Refer to Figure 11.1. Assume aggregate demand is represented by AD. and fullemployment output Is $6.0 trillion. The economy confronts a real GDP gap of Mu iple Choice 0 $2 trillion. O $.4 trillion. El Screen capture - new A Screens hot taken 0 $.63 trillion. Show in folder 0 None of the choices are correct. The balanced budget multiplier says that Multiple Choice O An increase in government spending paid for by a tax increase of equal size shifts aggregate demand leftward. O An increase in government spending paid for by a tax increase of equal size shifts aggregate demand rightward. Screen capture . now O Screenshot taken An increase in government spending must be paid for by a tax cut of equal size. Show in folder O An increase in government spending paid for by a tax increase of equal size has no effect on aggregate demand.Crowding out is caused by Multiple Choice O A decline in overall spending. O An increase in consumer spending. O An increase in government borrowing. O A decline in tax revenues.A tax cut has a smaller impact on aggregate demand than an increase in government purchases of the same size because Multiple Choice O A portion of the tax cut is invested. O A portion of the tax cut is saved. Screen capture . now O Screenshot taken The tax cut multiplier is equal to 1. Show in folder O Tax cuts do not increase disposable income. OFiscal policy works primarily through Multiple Choice O The improvement of worker skills through subsidized training programs. O Shifts of the AS curve. Screen capture . now O Screenshot taken Shifts of both AD and AS, as a result of changes in the interest rate. Show in folder O Shifts of the AD curve.The "naive Keynesian model" is unrealistic because it Multiple Choice O Assumes that AS is upward sloping when it is more probably horizontal. O Does not take into account probable changes in the price level as the economy approaches full employment. O Assumes that the price level decreases as AD increases. O Does not account for changes in output due to the multiplier.Fiscal restraint is defined as Multiple Choice O Tax hikes or spending cuts intended to increase aggregate demand. O Tax hikes or spending cuts intended to reduce aggregate demand. Screen capture . now O Screenshot taken Tax cuts or spending hikes intended to increase aggregate demand. Show in folder O Tax cuts or spending hikes intended to reduce aggregate demand. O OTo eliminate an AD shortfall of $100 billion when the economy has an MPC of 0.50, the government should increase spending by Multiple Choice O $50 billion. O $200 billion. O $100 billion. O $500 billion.The general formula for computing the desired stimulus is Multiple Choice O AD shortfall - the multiplier. O AD shortfall : the multiplier. Screen capture . now O Screenshot taken AD shortfall *the multiplier. Show in folder O AD shortfall + the multiplier.The AD shortfall is the amount of additional aggregate demand needed to achieve full employment after allowing for Multiple Choice O Multiplier effects. O Price level changes. O Feedback effects. O Fiscal stimulus.The use of government taxes and spending to alter macroeconomic outcomes is known as Multiple Choice O Fiscal policy. O Monetary policy. Screen capture . now O Screenshot taken Foreign trade policy. Show in folder O Income policy.From a Keynesian perspective, the way out of recession is to Multiple Choice O Use monetary restraint. O Wait for the economy to fix itself. Screen capture . now O Screenshot taken Get consumers to spend less on goods and services. Show in folder O Get consumers to spend more on goods and services.A tax cut Multiple Choice O Contains less fiscal stimulus than an increase in government spending of the same size. O Indirectly increases the disposable income of consumers. O Directly decreases the disposable income of consumers. O Shifts the AD curve to the left.If AD excess equals $40 billion and the MPC equals 0.75, then the desired fiscal restraint equals Multiple Choice O $160 billion. O $53.33 billion. Screen capture . now O Screenshot taken $30 billion. Show in folder O $10 billion. O O OJack has an MPC of 0.82 and Jill has an MPC of 0.78. Ceteris paribus, if the government transfers income from people who behave like Jack to people who behav like Jill, Multiple Choice O Aggregate demand will remain the same. O Aggregate demand will decrease. Screen capture . now Screenshot taken O Show in folder It is not possible to predict what will happen to aggregate demand. O Aggregate demand will increase.The statement "balancing the budget on the backs of the poor" refers to Multiple Choice O Government spending cuts on public parks in order to reduce government expenditures. O Transfer payment cuts in order to reduce government expenditures. O Government spending increases in order to increase aggregate expenditures. O Tax increases on the poor in order to increase government revenues.Which of the following explains why the government should not increase spending by the entire amount of the AD shortfall to move the economy to full employment? Multiple Choice O Price level changes will make up for the difference between the fiscal stimulus and the AD shortfall. O The price level is constant. Screen capture . now Screenshot taken O Show in folder The multiplier process will contribute to an additional increase in aggregate demand that will cause an inflationary gap. he refers to O O The government can increase taxes to create an additional increase in aggregate demand. O OWhich of the following is a fiscal policy tool used to stimulate the economy? Multiple Choice O Lower interest rates. O Increased government purchases. Screen capture . now O Screenshot taken Increased imports. Show in folder O Reducing inefficient employment of resources. OA limitation on fiscal policy is time. Which of the following does not impact the timeliness of fiscal policy? Multiple Choice O It takes time to recognize that the economy is in trouble. O It will take time for the policy to be implemented and for the many steps in the multiplier process to unfold. O It will take time to develop a policy strategy and for Congress to pass it. O All of these impact the timeliness of fiscal policy.Suppose the consumption function is C = $700 billion + 0.8Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with Instructions: Enter your responses rounded to the nearest whole number. a. A $100 billion increase in government purchases? 55 E billion b. A $100 billion tax cut? 55 E billion c. A $100 billion increase in income transfers? $ :| billion billion c. A $100 billion increase in income transfers? billion What will the cumulative AD shift be for d. The increased government spending? Screen capture . no billion Screenshot taken Show in folder e. The tax cut? Suppose the consumption function is C =$700 billion + 0.BY and the government wants to stimula billion demand at current prices shift Initially Instructions: Enter your responses rou a. A $100 billion increase in govemme f. The increased transfers? billion b. A $100 billion tax cut? billion billion [ Copied to clipboaIf the AD shortfall is $100 billion and the MPC is 0.95, Instructions: Enter your responses rounded to one decimal place. a. How large is the desired fiscal stimulus? $ billion b. How large an income tax cut is needed? 515 E billion c. Alternatively, how much more government spending would achieve the target? $ billion Use the following data to answer three questions: Price Level supplied STU Real GDP demanded Instructions: Enter your responses as a whole number. a. What is the equilibrium GDP? b. If full employment occurs. at a real output level 015850, how large is the real GDP gap? c. If AD changes enough to restore full employment, what will the rice level be? EGG