A government policy action that moves the economy closer to full employment or potential output is called: an aggregate supply policy. an expansionary policy. a stabilization policy. a contractionary policy.
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an expansionary policy.
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a stabilization policy.
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- Aggregate supply (AS) changes with each of the following except: Fiscal policy and monetary policy Potential GDP changes The money wage rate changes The money prices of other resources changeSuppose that the government decreases spending more than is necessary to close an inflationary gap. What is the MOST likely result? Inflation will increase. The price level will increase. Aggregate output will fall short of potential output. Aggregate output will increase.If the economy experiences inflation and economic growth, this means that aggregate demand grows by more than aggregate supply. True or False
- Aggregate supply grows over time because of growing consumer and government spending. True or FalseAssess the validity of the following statement: An increase in government spending, the target inflation rate or the monetary base shifts the aggregate demand curve to the right.An increase in demand in total demand in the Keynesian range of an aggregate supply curve will cause unemployment and deflation increase employment, output, and the price level. Increase the price level, but not employment and output. increase employment and output, but not the price level.
- The long-run aggregate supply curve shifts right if immigration from abroad increases. the capital stock increases. technology advances. All of the above are correct.The government possesses the tools necessary to influence the output level in the short run through use of monetary and fiscal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The current tax system acts as an automatic stabilizer. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Which of the following policies are examples of automatic stabilizers? Check all that apply. Corporate income taxes Personal income taxes The federal funds rateIf aggregate supply is vertical, then which of the following statements must be true? Aggregate demand does not affect the quantity of output. Inflation creates greater social benefits. Inflation will accompany any rise in output. Aggregate demand does not cause inflationary changes in price level.
- Which of the following would not shift the aggregate demand curve to the left? Group of answer choices An decrease in government spending. An increase in income taxes. A stock market boom. A decrease in the money supply.The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. The current tax system acts as an automatic stabilizer. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. Which of the following are examples of automatic stabilizers? Check all that apply. O Unemployment insurance benefits The federal funds rate Corporate income taxes O O OThe graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result? a) macroeconomic supply will decrease in the short run b) the economy will experience lower economic growth c) inflationary pressures will be mild d) cyclical unemployment will decrease