Exam 11: Fiscal Policy.

-Refer to Exhibit 11.2, which shows the relationship between the price level and real GDP. Suppose the economy is currently at e'. A leftward shift of the short-run aggregate supply curve would return the economy to potential output at _____

Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?

How many years of contraction were there during the Great Depression?

Which of the following is an appropriate fiscal policy prescription that addresses the inflation that occurs when the economy is above potential GDP?

People will be likely to spend a higher percentage of any additional income when _____

Which of the following is not a tool of fiscal policy?

The objective of a demand-management policy is to _____

Classical economists believed that the economy automatically moves toward equilibrium at full employment.

How did the tax cut of 1964 affect the unemployment rate?

The effect of a change in net taxes on the quantity of real GDP demanded equals the resulting shift in the consumption function times _____

A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.

During economic contractions, transfer payments such as welfare benefits _____

Either an increase in autonomous net taxes or a decrease in government purchases can close an expansionary gap.

Fiscal policy _____

The government's $168 billion plan to stimulate the softening economy in 2008 failed partly because the tax cuts were temporary.

According to classical economists, market oriented economies could _____

If the economy is already producing at its potential, _____

A change in net taxes affects the equilibrium quantity of GDP demanded _____

Supply-side economics emphasized government policies to _____

Suppose the federal government increases the unemployment benefits financed by higher income taxes. In this case, which of the following is likely to occur?