Exam 11: Fiscal Policy

When government spending increases,consumption also increases via the multiplier process.

The crowding out effect refers to a decrease in

Fiscal policy formation causes a delay in implementation even though a recession can usually be recognized within a few weeks after it begins.

The recessionary GDP gap will differ from the AD shortfall when the

According to Figure 11.2,a shift from AD₁ to AD₂ will

If the recessionary GDP gap is $500,then the proper fiscal stimulus when faced with an upward-sloping AS curve is to

If the multiplier equals 2 and the AD shortfall is $6 million,the desired fiscal stimulus is

An income transfer contains less fiscal stimulus than an increase in government spending of the same size.

The amount of additional aggregate demand needed to achieve full employment after allowing for price level changes is

Which of the following would not be a policy option to eliminate an AD shortfall?

Fiscal restraint is defined as

Jack has an MPC of 0.82 and Jill has an MPC of 0.78.Ceteris paribus,if the government transfers income from people who behave like Jack to people who behave like Jill,

Fiscal policy formation is typically a quick process.

If the economy is experiencing excess demand that is causing inflation,the inflationary pressures can be eliminated by reducing government spending by less than the amount of excess demand.

Refer to Figure 11.1.Assume aggregate demand is initially represented by AD₁ and full-employment output is $6.0 trillion.If aggregate demand increases by the amount of the GDP gap,equilibrium will occur at

Fiscal policy involves changes in government spending and taxes,but not regulation of prices or production.

Fiscal policy affects

Assuming Q_F is the full employment equilibrium then a shift from AD₁ to AD₂ in Figure 11.2 will

Which of the following fiscal policies cause a decrease in aggregate expenditures?

A $500 increase in government spending contains more fiscal stimulus than a $500 tax cut.