17. a government w ants to pursue an expansionary tscal more expansionary when t

Question

17. a government w ants to pursue an expansionary tscal more expansionary when the: A. Economy's MPS is small B. Economy's MPS is large C. Economy's MPC is small D. Unemployment rate is low policy, then a tax cut ot a certain suze wall be ' 18. A given reduction in government spending will dampen demand-pull inflation by a greater amount the: A. Economy's MPS is large B. Economy's aggregate supply curve is flat C. Economy's MPC is large D. Unemployment rate is high 19. One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy: A. Makes the actual budget a better reflection of the condition of the economy than the standardized budget B. Does not produce a cyclical deficit as discretionary policy does C. Is not subject to the timing problems of discretionary policy D. Has a greater multiplier effect than discretionary policy 20. Due to automatic stabilizers, when income rises, government transfer spending: A. Increases and tax revenues decrease B. Decreases and tax revenues increase C. And tax revenues decrease D. And tax revenues increase 21. If government tax revenues automaticall y change in a countercyclical direction over the course of the business cycle, this would be called a(n): A. Discretionary fiscal policy B. Expansionary fiscal policy C. Fiscal multiplier effect D. Built-in fiscal stabilization which ofthe following is an example of built-in stability? As real GDP decreases income tax revenues: A. Increase and transfer payments decrease B. Decrease and transfer payments increase C. And transfer payments both decrease D. And transfer payments both increase 22, 23 As the economy declines into recession, the collection ofpersonal income tax revenues automatically falls. This relationship best describes how the progressive income tax system: A. Increases crowding out in the economy B. Decreases real interest rates in the economy C. Offsets the timing problem for fiscal policy D. Serves as an automatic stabilizer for the economy 24. The more progressive the tax system, the: A. Less is the built-in stability for the economy B. Greater is the built-in stability for the economy C. Less is the effect of crowding-out on the economy D. Greater is the severity of business fluctuations on the economy

Explanation / Answer

Answering only the first one as these are separate and independent questions.

17) This tax cut would be most effective when the economy MPC is large. So every additional income is spent more by the economic agents.

Also, when MPC is large => MPS is small because MPC + MPS = 1

=> answer is option A -> MPS is small

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