macroeconomics

Question 4 1) Fiscal policy attempts to achieve all of the following objectives EXCPET * Price level stability Full employment Sustained economic growth d A stable money supply 2) What would be the effect of a contractionary fiscal policy on the output level, price level and unemployment rate? * RGDP decreases, price level decreases and unemployment rate increases RGDP decreases, price level increases and unemployment rate decreases RGDP decreases, price level decreases and unemployment rate decreases d) RGDP increases, price level decreases and unemployment rate increases The "crowding- out effect" refers to possibility that * Larger expenditures by the government simply crowd-out state and local spending Borrowing by the government crowds out private borrowing Low income individuals are crowding middle income individuals d) Central bank sells bonds in the open market 4) A contractionary fiscal policy * Correct an inflationary gap Correct a recessionary gap Is done when the economy is at long run equilibrium d) None of the above 5) When the aggregate demand curve returns to its initial position after an expansionary fiscal policy, this is known as * Complete crowding out Incomplete crowding out Zero crowding out d Keynesian multiplier If banks hold a 30%% reserve ratio, an initial increase in bank reserve of $30 will lead to an * Increase in the money supply of $180 Decrease in the money supply of $180 cl Increase in the money supply of $100 Decrease in the money supply of $100