(8) Good deflation is characterized by an increase in supply at every price. a d
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Question
(8) Good deflation is characterized by an increase in supply at every price. a decrease in supply at every price. an increase in demand at every price. a decrease in demand at every price.
(9) The goal of Keynesian fiscal policy during a recession is to do nothing – let the economy recover on its own. move the economic equilibrium back to the full-employment level by increasing aggregate demand. move the economic equilibrium back to the full-employment level by decreasing aggregate supply. reduce long-run aggregate supply so that the economy can reach full employment without a long period of adjustment.
(10) Assume that the government increases its spending by $100 million to stimulate demand. In the long run, the effect of this spending is to increase output by more than $100 million. increase output by $100 million. raise prices. increase unemployment.
(11) The amount by which annual government spending exceeds annual government tax revenue is called the deficit. the debt. the dividend. M1.
(12) Suppose a law was passed to authorize more spending on roads, but several months later the first dollar had not been spent. This delay is an example of a(n) recognition lag. political lag. administration lag. operational lag.
(13) Which of the following is an example of an unintended effect of fiscal policy? The crowding-out effect Increased aggregate demand Unemployment insurance Reductions in international trade
(14) The goal of Keynesian fiscal policy during a recession is to do nothing—let the economy recover on its own. move the economic equilibrium back to the full-employment level by increasing aggregate demand. move the economic equilibrium back to the full-employment level by decreasing aggregate supply. reduce long-run aggregate supply so that the economy can reach full employment without a long period of adjustment.
(15) Imagine that our representatives in Congress have concluded that the economy needs the stimulus of additional government spending, but they have spent several months haggling over what type of spending will be authorized. This is an example of a(n) recognition lag. political lag. administration lag. operational lag.
Explanation / Answer
(8). B is Correct, A decrease in Supply at every price. In Deflation Money suuply is reduced so there is drop in demand due to which prices falls, But Supply of goods remains same. It is necessary for a good deflation that supply of goods must fall to accomodate decrease in price levels.
(9). B is Correct, Fiscal Policy aims to pump money supply into the system and will help boosting the aggregate demand.
(10). C is Correct, In long run it will increase prices as the demand picks up.
(11). The Deficit, As Expenditure is more than Tax revenues government will try to borrow in order to meet expenditure.
(12). Political Lag, The government officials are haggling and the issue got struck in political affair.
(13). The crowding-out effect-In the wake of Expansionary Fiscal Policy where government spending fails to increase aggregate demand due to rise in intrest rates and decreased private sector spending or investment equivalent to the government. Why Government might increase tax or finance the spending by borrowing. Increase in taxes will cause decreased business confidence and borrowing will increasse the interest rates in the market.
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