Which of the following statements is not true? O A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments. O Automatic stabilizers act to moderate business cycles primarily through the personal income and consumption channels. O Other things equal, the steeper the slope of the aggregate supply curve, the less effective will be the expansionary fiscal policy. O When aggregate expenditure (AE) exceed Real GDP, inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.

Which of the following statements is not true? O A decrease in federal income tax rates is an example of fiscal policy that affects GDP through consumption adjustments. O Automatic stabilizers act to moderate business cycles primarily through the personal income and consumption channels. O Other things equal, the steeper the slope of the aggregate supply curve, the less effective will be the expansionary fiscal policy. O When aggregate expenditure (AE) exceed Real GDP, inventory levels rise unexpectedly, which sends a signal to firms that they have overproduced, so they cut back on production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the accompanying table for Waxwania. Government Expenditures, G Tax Revenues, T Real GDP $190 100 $500 190 120 600 190 140 700 190 160 800 190 180 900 a. What is the marginal tax rate in Waxwania? ____percent --The average tax rate? _____percent b. Suppose Waxwania is producing $600 of real GDP, whereas the potential real GDP (or full-employment real GDP) is $700.-How large is its budget deficit? $____ -Its cyclically adjusted budget deficit? $____ -Its cyclically adjusted budget deficit as a percentage of potential real GDP?________ percent
Which statement is CORRECT? A) Automatic stabilizers indicate deliberate action by policy makers. O B) Discretionary fiscal policy shows automatic adjustments without any specific effort by policy makers. C) Discretionary fiscal policy indicates deliberate action by policy makers. Automatic stabilizers are risky tó use and sometimes can get the economy D) destabilized.
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Figure 16-7 Price level P3 a P₂ P₁ 0 LRAS A increase taxes LRAS 8 с Y₂ Ya contractionary fiscal policy O increase government spending O decrease interest rates SRAS₁ AD₁ SRAS AD₂ Refer to Figure 16-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP? Real GDP (trillions of dollars)
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What would happen to output, employment, and the price level if the government increased spending on infrastructure, ceteris paribus? O Output would decrease, employment would decrease, and the price level would decrease O Output would decrease, employment would decrease, and the price level would increase O Output would decrease, employment would increase, and the price level would increase Output would increase, employment would increase, and the price level would decrease. O Output would increase, employment would increase, and the price level would increase Question 2(Multiple Choice Worth 5 points) (03.06 MC) Assume the price level is increasing, real GDP is decreasing, and the unemployment rate is increasing. Which event would explain this macroeconomic situation? OA positive supply shock OA negative supply shock A positive demand shock OA negative demand shock O insufficient data
Which of the following could be leakage? O A) Marginal Propensity to Consume B) Autonomous Expenditures O c) Disposable Income O D) Marginal Tax Rate
All of the following are classical objections to the use of expansionary fiscal policy during a recession, EXCEPT O Casical economists emphasize the importance of supply shocks in explaining the business cycle. Expansionary fiscal policy during recessions caused by supply shocks cannot stop a recession and only cause additional inflation O Cassical economists are more lkely to believe that the fiscal multiplier is greater than one, implying that expansionary fscal policy has a poor rate of return in terms of generating short-run real GDP growth. O The economy is quick to adjust during recessions, making expansionary fiscal policy unnecessary and possibly destabilizing. O Expansionary fiscal policy increases government debt, causes inflation, crowds out private investment, and wil likely require taxes to increase at some point.
Asap both 1.a) Which of the following statements is correct?l.Expansionary fiscal policy is used to remove a recessionary gap.ll. Expansionary fiscal policy is used to shift AD right.A) l onlyB) I onlyC)both I and ID) neither I nor ll 1.b) Which of the following are examples of contractionary fiscal policy?A) decreasing government expendituresB) increasing taxesC) increasing transfer paymentsD) A and B are both contractionary fiscal policiesE) A, B, and C are all contractionary fiscal policies
Which of the following statements about the tax wedge is true? Note: The tax wedge is the difference between the pre-tax and after-tax wage (or any return to economic activity) O Causes a reduction of potential GDP and the long-run aggregate supply. O Causes more people to be employed because of higher wages. The tax-wedge is an example of demand side economics. O Tax revenues increase with a greater tax wedge.
Given an upward-sloping short-run AS curve, expansionary fiscal policy (ceteris paribus) will result in: (i) Higher prices in the short run (ii) Higher output in the short run (iii) Higher prices in the long run (iv) Higher output in the long run O a. Only (i) and (ii) O b. Only (iii) and (iv) O c. Only (ii) and (iii) O d. Only (i) and (iv)
Suppose the level of potential GDP is $6,000 billion, but the equilibrium level of GDP is $7,500 billion. If the marginal propensity to consume is 0.67, how much should government spending be decreased to eliminate the inflationary gap? O $250 billion $1500 billion O $500 billion O $125 billion