QUESTION 1 If the government wishes to promote a higher rate of growth of real G

Question

QUESTION 1

If the government wishes to promote a higher rate of growth of real GDP, a supply-side economist would argue the appropriate policy is

leaving the economy alone and letting the natural forces bring it into a long-run equilibrium.

engaging in expansionary fiscal policy by lowering marginal tax rates.

engaging in expansionary fiscal policy of increasing government spending.

lowering marginal tax rates on people and raising them on corporations.

0.42 points   

QUESTION 2

Which one of the following is NOT an automatic stabilizer?

the system of national defense procurement

the income tax system

unemployment compensation programs

the system of welfare payments

0.42 points   

QUESTION 3

Supply-side economists argue that decreasing marginal tax rates

increases productivity and shifts the AD curve to the left.

increases productivity and shifts the AS curve to the left.

increases productivity and shifts the AS curve to the right.

due to the Ricardian equivalence, has no impact on the economy.

0.42 points   

QUESTION 4

The Ricardian equivalence theorem states that

spending on national defense is a direct expenditure offset.

government spending financed by taxes is equivalent to government spending financed by borrowing.

an increase in government spending by the federal government leads to offsetting reductions in state government spending.

an increase in government spending financed by higher taxes has no effect on aggregate demand.

0.42 points   

QUESTION 5

Supply-side economics focuses attention on how fiscal policy might be used to

increase aggregate demand to the full-employment level of real GDP.

shift the aggregate supply curve out.

align aggregate demand and aggregate supply.

increase consumption.

0.42 points   

QUESTION 6

In the traditional Keynesian model, if the government increases spending, then

both real Gross Domestic Product (GDP) and the price level will rise.

real Gross Domestic Product (GDP) will increase and the price level will fall.

real Gross Domestic Product (GDP) will rise and the price level will remain constant.

real Gross Domestic Product (GDP) will remain constant and the price level will rise.

0.42 points   

QUESTION 7

Supply-side economists argue that

lower tax rates lead to a drop in real Gross Domestic Product (GDP).

lower tax rates always lead to lower tax revenues.

lower tax rates sometimes lead to increased tax revenues.

higher tax rates lead to increased productivity.

0.42 points   

QUESTION 8

The traditional Keynesian approach to fiscal policy assumes that

cutting taxes is a more effective way to stimulate the economy than is increasing government spending.

the effect of unemployment compensation is to destabilize the economy.

an equal income distribution ensures a stable economy.

consumers spend more when their incomes are higher.

0.42 points   

QUESTION 9

Discretionary fiscal policy

can be very effective in influencing real GDP during abnormal times, such as when a nation is at war.

may reassure investors and consumers that the federal government will be able to avert a major economic downturn.

is not very effective in influencing real GDP during normal times because of time lags.

all of the above

0.42 points   

QUESTION 10

Which of the following best explains why the federal tax rebates in 2008 and 2009 had almost no effects on aggregate demand?

According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because they were accompanied by more government spending.

According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because taxpayers did not believe the rebates would occur.

According to the permanent income hypothesis, those one-time tax rebates did not affect consumption because they did not change taxpayers' permanent income.

According to Ricardian equivalence theorem, those tax rebates did not affect aggregate demand because there were no direct expenditure offsets.

0.42 points   

QUESTION 11

During which time will fiscal policy be the most effective?

In the middle of expansions

Times of war

Times of stagflation

Normal times

0.42 points   

QUESTION 12

During normal times, discretionary fiscal policy

is more effective in influencing real GDP than automatic stabilizers.

is probably not very effective in influencing real GDP due to time lags.

works well because there are no lag problems in influencing real GDP.

is more effective in influencing real GDP than at times of a recession.

0.42 points   

QUESTION 13

Supply-side economists argue that changes in tax rates cause changes in

saving.

the full-employment level of output.

labor supply.

all of the above.

0.42 points   

QUESTION 14

Whenever government spending is a substitute for private spending

there is a direct multiplier effect.

the effects of expansionary fiscal policy are dampened.

interest rates will rise.

the Ricardian equivalence theorem holds.

0.42 points   

QUESTION 15

Suppose there are two economies that are identical in every way with the following exception. Economy A has an unemployment compensation system while economy B does NOT have an unemployment compensation system. Now suppose both economies experience the same drop in planned investment. Which of the following is correct?

Real GDP will fall the same in both economies.

Real GDP will fall more in economy B than in economy A.

Real GDP will fall more in economy A than in economy B.

The effect on the relative size of the reduction in real GDP in the two economies is ambiguous.

leaving the economy alone and letting the natural forces bring it into a long-run equilibrium.

engaging in expansionary fiscal policy by lowering marginal tax rates.

engaging in expansionary fiscal policy of increasing government spending.

lowering marginal tax rates on people and raising them on corporations.

Explanation / Answer

Ans1) the correct option is engaging in expansionary fiscal policy by lowering marginal tax rates

Ans2) The correct option is the system of national defense procurement

Ans3) the correct option is increases productivity and shifts the AS curve to the right.

Ans4) the correct option is an increase in government spending financed by higher taxes has no effect on aggregate demand.

Ans5) the correct option is shift the aggregate supply curve out.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.