. At which time period is an economic expansion occurring? O Year 3 O Year 9 Year 1 b. What is the best policy action by the federal government during an economic expansion? O contractionary fiscal policy full-employment fiscal policy O expansionary fiscal policy c. True or false: In order to smooth out the business cycle, fiscal policy should adjust government spending and taxes to reflect the exact difference between actual GDP and full-employment GDP. O True O False

. At which time period is an economic expansion occurring? O Year 3 O Year 9 Year 1 b. What is the best policy action by the federal government during an economic expansion? O contractionary fiscal policy full-employment fiscal policy O expansionary fiscal policy c. True or false: In order to smooth out the business cycle, fiscal policy should adjust government spending and taxes to reflect the exact difference between actual GDP and full-employment GDP. O True O False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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China's Economy Just Shrank for the First Time in Decades. It Could Still Eke Out Growth This Year China's real GDP decreased 6.8 percent in the first quarter of 2020. Investment decreased by 16 percent and consumer spending by 12.5 percent. Exports decreased 13 percent. Explain how gavemment expenditure minus imports changed in the first quarter of 2020. Government expenditure minus imports O A. decreased by more than 6.8 percent O B. must have increased OC. must have remained constant O D. decreased by less than 6.8 percent or increased
2. Assume that there is an increase in taxes Which determinant? A AD or A AS? P LRAS SRAS P₁ AD What happens to: Price Level Real GDP Inflation Unemployment Economic Growth Y YF
of Fiscal policy involves Select one: O O a. the use of interest rates to influence the level of GDP. b. the use of tax and spending policies by the government. c. decreasing the role of the Federal Reserve in the everyday life of the economy.
5. Demand side fiscal policy is also known as Keynesian Economic Theory * O True O False
To minimize GDP fluctuations, the government should run a budget in times of recession and a budget in times of boom. O a. Surplus; surplus O b. Deficit; deficit Oc Surplus; deficit O d. Deficit; surplus
6. Does government borrowing crowd out private spending? Suppose a hypothetical economy is operating at an output level that is well below full employment. In an attempt to increase aggregate demand, the government borrows money in order to increase spending. According to Keynesian economists, how are each of the following items affected by the increase in government spending and borrowing? Increases Decreases Consumer and Business Optimism O O Consumption O Business Investment O
Does the time bomb caused by Social Security and Medicare create a fiscal gap or a generational gap? The time bomb caused by Social Security and Medicare creates _______. A. a fiscal gap and a generational gap B. neither a fiscal gap nor a generational gap C. a fiscal gap only D. a generational gap only
'Finance minister announces that the federal income-tax rate will rise by three percentage points." Assuming that aggregate output is demand-determined, the AE function will and equilibrium national income will O a. Become flatter; fall. O b. Shift up parallel to itself; rise. Ос. Весome steeper, rise. O d. Shift down parallel to itself; fall. O e. Not change; not change.
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QUESTION 47 An increase in the marginal propensity to consume (MPC) O a. increases the multiplier, so that changes in government spending have a larger effect on aggregate expenditure (aggregate demand). O b.increases the multiplier, so that changes in government spending have smaller effect on aggregate expenditure (aggregate demand). O c. decreases the multiplier, so that changes in government spending have a larger effect on aggregate expenditure (aggregate demand). O d. decreases the multiplier, so that changes in government spending have a smaller effect on aggregate expenditure (aggregate demand).
If the government were to try to offset surplus years with deficit years over the business cycle, this would result in O A. a reduction in investment capital. O B. a higher debt-to-GDP ratio. OC. an annually balanced budget. O D. a structurally balanced budget. O E. a cyclically balanced budget.
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