Exam 16: The Markets for Labor, Capital, and Land

To offset the effect of a steep fall in net exports on the economy, the government might:

The smaller the MPC:

If the marginal propensity to consume is 4/5, the multiplier is:

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?

Which policy would a supply-sider prefer, an across-the-board tax reduction in income tax rates or a package of tax-relief measures that would give every household a $200 tax rebate and allow them to deduct the interest they pay on credit card purchases?

In the short run, fiscal policy has its primary affect on aggregate demand but in the long run fiscal policy can influence saving, investment and economic growth.

If the government decides to spend an extra $4 billion on fighter jets that they would otherwise have spent on computers, and the MPC = 0.75, what is the effect on AD?

Fiscal policy is the use of government purchases and taxes to alter RGDP and the price level.

The government's fiscal policy is its plan to regulate aggregate demand by manipulating:

Why don't governments avoid budget deficits under all circumstances?

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

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.

If MPC = 2/3, a decrease in government purchases of $10 billion will ultimately lead to:

If Melanie had $200,000 of income and spent $180,000 on consumption in 2010 and had $300,000 of income and spent $240,000 on consumption in 2011:

The main components of spending, which can cause changes in aggregate demand, are:

If there is initially a federal budget deficit, and taxes rise, while transfer payments fall:

Assume that there is a $20 billion increase in government purchases. If MPC = 0.8, the sum of the indirect effect on aggregate demand through induced additional consumption purchases is equal to:

A decrease in government purchases or an increase in taxes, other things being equal, will tend to:

Automatic stabilizers in the United States are:

A major advantage of automatic stabilizers is that they: