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pinkcod156Lv1

11 Dec 2019

Which of the following represents the most expansionary fiscal policy?

a. increase in government spending of $10 billion

b. increase in government spending of $1 billion

c. increase in tax rate by 2%

d. decrease in money supply by $10 million.

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Related questions

Which of the following represents the most contractionary fiscal policy?

a. $30 billion tax cut.
b. $30 billion-increase in government spending.
c. $30 billion tax increase.
d. $30 billion decrease in government spending.

silverferret259

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume(MPC) is 0.75, and the government follows Keynesian economics by following expansionary fiscal policy to increase aggregate demand (total spending). If an increase in $1000 billion aggregate demand can restore full employment, the government should:

a. increase spending by $250 billion.

b. decrease spending by $750 billion.

c. increase spending by $1000 billion.

d. increase spending by $750 billion.

yelloweagle292

5. Fiscal policy is enacted through changes in

A. interest rates and the price level.

B. the supply of money and foreign exchange.

C. unemployment and inflation

D. taxation and government spending.

6. In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could

A. increase taxes by $16 billion.

B. increase taxes by $24 billion.

C. decrease government spending by $10 billion.

D. decrease government spending by $16 billion.

7. If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

A. contractionary fiscal policy.

B. no change in fiscal policy.

C. expansionary fiscal policy.

D. countercyclical fiscal policy.

8. Most economists believe that fiscal policy is:

A. better than the monetary policy for "fine-tuning" the economy.

B. better than the monetary policy for month-to-month stabilization.

C. not as good as the monetary policy for month-to-month stabilization.

D. not very good at pushing the economy in a particular direction.

9. An increase in the legal reserve ratio

A. increases the money supply by increasing excess reserves

B. decreases the money supply by decreasing excess reserves

C. increases the money supply by decreasing excess reserves

D. decreases the money supply by increasing excess reserves

10. The discount rate is the rate of interest at which

A. Federal Reserve Banks lend to commercial banks

B. savings and loan associations lend to some builders

C. Federal Reserve Banks lend to large corporations.

D. commercial banks lend to large corporations

11. Which of the following actions by the Fed most likely increase commercial bank lending?

A. raising the reserve ratio

B. increasing the federal funds rate target

C. reducing the interest paid on excess reserves held at the Fed

D. selling bonds to commercial banks and the public

12. Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to ______, which will ______ investment spending.

A. decrease; decrease

B. decrease; increase

C. increase; increase

D. increase; decrease