If the marginal propensity to consume is .6, what is the multiplier of fiscal stimulus?

Question 1 options:

6

0.6

1.2

2.5

Question 2(4 points)

Suppose a government ignores calls to balance the budget during a recession (austerity policy) and instead increases government spending. According to the textbook analysis, this will likely:

Question 2 options:

dampen the recession

there is no way of knowing

have no effect on the recession

amplify the recession

Question 3(4 points)

Which of the following does the textbooknotconsider a government policy failure during the Great Depression?

Question 3 options:

Raising interest rates.

New Deal Infrastructure Policies

Attempting to balance the budget (austerity).

Failing to combat the fall in prices.

Question 4(4 points)

In the U.S., a major way the Federal Reserve influences the prevailing interest rate is:

Question 4 options:

fiscal policy

that is the job of the Treasury, not the Federal Reserve.

the buying and selling of government bonds

printing money

Question 5(4 points)

According to chapter 14 (and John Maynard Keynes) a recession is a good time for the government to:

(select all that apply). Multiple answers

Question 5 options:

start large public infrastructure projects.

cut unemployment benefits.

cut taxes.

start combating the budget deficit.

Question 6(4 points)

What is private investment (firms buying capital goods) dependent on?

Question 6 options:

Current levels of output

Expectations of fiscal policy multiplier effects

Current government spending

Expectations of future profit

Question 7(4 points)

In a inflationary climate, the average consumer would:

(select all that apply)

Question 7 options:

spend more today because goods will be more expensive tomorrow.

decrease spending because goods are cheaper today.

decrease savings, since the value of their savings will decrease more than normal.

increase savings, since the value of their savings will increase more than normal.

Question 8(4 points)

All else held equal, a lower interest rate...

Question 8 options:

decreases the cost of borrowing and decreases consumption.

decreases the cost of borrowing and increases consumption.

increases the cost of borrowing and increases consumption.

increases the cost of borrowing and decreases consumption.

Question 9(4 points)

A decrease in the Marginal Propensity to Import:

Question 9 options:

not enough information

decreases the multiplier

causes no change to the multiplier

increases the multiplier

Question 10(4 points)

Let's say there is a tax-cut on taxes primarily paid by those with higherincomes during an expansion. The multiplier of this fiscal stimulus is likely to be

Question 10 options:

greater than 1

greater than 1 but less than 10

exactly 1

less than 1

Question 11(4 points)

An decrease in taxes (select all that apply):

Question 11 options: Multiple answers

would be considered expansionary monetary policy

would deter economic growth

increases the multiplier

would be considered expansionary fiscal policy

Question 12(4 points)

Interest rates affect (select multiple):

Question 12 options: multiple answers

The level of inflation

Asset Prices

Exchange Rates

None of the above

Question 13(4 points)

A situation where the rate of inflation is negative is called:

Question 13 options:

deflation

disinflation

hyperinflation

stagflation

Question 14(4 points)

The goal of public policy in the realm of innovation is (in part) to strike a balance between:

Question 14 options:

economic growth and unemployment

incentivizing innovation and allowing for diffusion

subsidizing large firms and monetary controls

none of the above

Question 15(4 points)

The textbook points to ________ as a major cause of the Great Recession.

Question 15 options:

the decrease in power of unions

financial deregulation

Keynesian Economics

the oil crisis