Answered: In a recession, needs-tested spending…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In a recession, needs-tested spending ________ and induced taxes ________.

increases; increase

decreases; increase

increases; decrease

decreases; decrease

increase; do not change

Discretionary fiscal policy is defined as fiscal policy

initiated by an act of Congress.

left to the discretion of military authorities.

with multiplier effects.

initiated by a Presidential proclamation.

triggered by the state of the economy.

If government expenditure on goods and services increase by $100 billion, then aggregate demand

increases by $100 billion.

decreases by more than $100 billion.

increases by more than $100 billion.

increases by less than $100 billion.

remains unchanged.

The magnitude of the tax multiplier is ________ the magnitude of the government expenditure multiplier.

smaller than

greater than

exactly one half

the inverse of

equal to

Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. To increase real GDP, the government can use a fiscal stimulus of

decreasing government expenditure and simultaneously increasing taxes.

increasing the quantity of money.

increasing taxes only.

decreasing taxes and/or increasing government expenditure.

decreasing government expenditure only.

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