Suppose that the government claims that it has achieved a budget surplus for the

Question

Suppose that the government claims that it has achieved a budget surplus for the current fiscal year. If true, then total national debt at the end of the fiscal year would be:

Question 3 options:

zero.

greater than at the beginning.

smaller than at the beginning.

same as at the beginning

Higher government spending combined with tax cuts that reduce taxes collected, will __________ aggregate spending and shift the AD curve to the __________.

Question 4 options:

increase; right

decrease; right

increase; left

decrease; left

An open market purchase by the Fed

Question 5 options:

increases the demand for money.

increases the supply of money.

decreases the supply of money.

decreases the demand for money.

zero.

greater than at the beginning.

smaller than at the beginning.

same as at the beginning

Higher government spending combined with tax cuts that reduce taxes collected, will __________ aggregate spending and shift the AD curve to the __________.

Question 4 options:

increase; right

decrease; right

increase; left

decrease; left

An open market purchase by the Fed

Question 5 options:

increases the demand for money.

increases the supply of money.

decreases the supply of money.

decreases the demand for money.

Explanation / Answer

3. smaller than at the beginning. Government can repay its debt from surplus.

4. increase; right. Increase in public expenditure and decrease in taxes increases demand.

5. increases the supply of money. In Open market purchase, Fed buy government bond and securities and give money to public.

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