Exam 14: Fiscal Policy

If MPC = 0.75, a $40 billion decrease in government purchases would have what size effect on the "first round" of induced added consumption?

If Melanie had $200,000 of income and spent $180,000 on consumption in 2003 and had $300,000 of income and spent $240,000 on consumption in 2004:

A tax rate cut, increase in government purchases, and creating an investment tax credit would shift:

Supply-side economists believe that fiscal policy works only on the supply side of the economy.

Which of the following is true?

If MPC = 0.8, a $200 billion increase in government purchases would have what size effect on the "first round" of induced added consumption, and what total effect on AD?

The crowding-out effect implies that:

Based on the situation depicted in the graph below, which of the following would be an appropriate fiscal policy response?

The multiplier will be smaller, other things being equal:

If the government cuts taxes, total spending will fall and AD will shift to the left.

A cut in marginal tax rates would:

An increase in transfer payments combined with a decrease in government purchases would:

The federal government funds deficit spending by:

Expansionary fiscal policy will result in a ____ price level and ____ employment in the short run.

If government increases its purchases by $20 billion and the MPC = 0.9, the resulting increase in the consumption component of AD is:

Robert lost his job during the last recession and his yearly income fell by 15 percent.As a result of the action of automatic stabilizers, his disposable income fell by less than 15 percent.

Which of the following combinations of changes would have a contractionary effect on aggregate demand?

During a recession, total public assistance payments and unemployment compensation payments automatically increase while income taxes automatically decrease.Which of the following best describes the effect of these changes on aggregate demand?

AD will shift to the left, other things being equal, when:

Supply-side economists encourage government to reduce taxes, deregulate, and increase spending on research and development because they think that these types of policies lead to greater long-run economic growth.