Exam 21: Fiscal Policy

"Last month unemployment fell to 4 percent, its lowest level in years. The economy is growing rapidly, but consumer prices have risen at an annual rate of 10 percent during the last six months." Which of the following policies would be most appropriate under these circumstances?

Those who favor government policies to stimulate the economy by creating incentives for individuals and businesses to increase their productive efforts are supporting:

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

If an economy were experiencing a high rate of unemployment as the result of insufficient aggregate demand, a Keynesian economist would favor:

Appropriate supply-side policy (or policies) during a recession would be to do which of the following?

Automatic stabilizers "lean against the prevailing wind" of the business cycle because:

Exhibit 11-2 Aggregate demand and supply model Suppose the economy in Exhibit 11-2 is in equilibrium at point E₁ and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by:

In the _______ range of the aggregate supply curve, expansionary fiscal policy that causes aggregate ______ to increase will lead to a higher price level and a higher equilibrium level of real GDP. ​

If the economy is experiencing unemployment, then the most appropriate government policy would be to:

During the Reagan administration, the Laffer curve was used to argue that:

Supply-side economics is based on the theory that:

Automatic stabilizers stabilize the level of real GDP because:

Keynesian analysis stresses that a tax cut that increases the government's budget deficit or reduces its budget surplus:

When an economy dips into recession, automatic stabilizers will:

Exhibit 11-1 Disposable income and consumption data In Exhibit 11-1, when disposable income is increased from $2,000 to $3,000 to $4,000,

According to supply-side economists, lowering corporate income taxes:

Because of the automatic stabilizers, a decline in the level of economic activity will cause:

When both inflation and unemployment are concerns, supply-side economists argue in favor of policies to shift the

Suppose the economy was at full employment GDP and then consumer optimism soars. If automatic stabilizers are in place, the stabilizers will result in:

Assume the marginal propensity to consume (MPC) is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the: