Exam 11: Fiscal Policy

The Laffer curve is representative of which of the following schools?

Programs that automatically increase government spending (relative to revenue)during a recession and automatically decrease government spending (relative to revenue)during an economic boom are called:

Equal increases in government spending and taxes will:

Which of the following statements is true ?

The formula to compute the spending multiplier is:

It is inflationary for government to increase spending if:

When an economy dips into recession, automatic stabilizers will:

Fiscal policy is concerned with:

The marginal propensity to consume is:

If the marginal propensity to save (MPS)is 0.50, the value of the spending multiplier is:

In the U.S. economy, the effect on federal tax revenues and spending of an increase in the unemployment rate is to:

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally (shift rightward)by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.90, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

When the economy enters a recession, automatic stabilizers create:

To combat a recession, Keynesian fiscal policy recommends:

Exhibit 11-6 Aggregate demand and supply model In Exhibit 11-6, if the aggregate demand curve is at AD₃, the government should:

The spending multiplier is:

Structures in the economy increase aggregate demand when the economy is in recession and decrease aggregate demand when the economy is inflationary are known as:

The marginal propensity to save (MPS)is computed as the change in:

Exhibit 11-6 Aggregate demand and supply model In Exhibit 11-6, if the aggregate demand curve is at AD₂, the government should:

If the marginal propensity to consume (MPC)is 0.80, the value of the spending multiplier is 2.