Exam 12: Fiscal Policy

All economists agree that in the short run:

Which of the following economies has the largest multiplier?

All of the following represent government spending as a part of aggregate demand except for:

If consumers save $0.13 out of each additional dollar of disposable income,the marginal propensity to consume is 1.3.

If consumers save 8 cents out of every dollar received,the:

With respect to the aggregate demand curve,a tax cut will:

Figure 12.2: -Using Figure 12.2,if Q₃ represents full employment,then a shift from AD₁ to:

Fiscal restraint may be an appropriate policy if inflation is a threat.

Full-employment GDP is the most desired level of GDP for an economy.

Fiscal policy is rarely used since aggregate demand is typically at the appropriate level for the economy to achieve full employment and price stability.

Government spending on goods and services plus income transfers are counted as part of aggregate demand.

The use of government spending and taxes to change the level of aggregate demand is fiscal policy.

Which of the following is the appropriate fiscal policy during a recession?

If aggregate demand is inadequate,equilibrium real output is less than the full-employment output level.

The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is known as:

Which of the following will occur if aggregate demand is above full-employment GDP?

When aggregate demand exceeds the full-employment level of output,the result is:

If aggregate supply is upward sloping,an increase in aggregate demand will result in:

Figure 12.1: -In Figure 12.1,assume aggregate demand is represented by AD₃.Which of the following could cause a shift to AD₂?

According to Keynes: