Macro Unit 3 Review Questions

A discretionary fiscal policy action to reduce inflation in the short run would be to

• increase transfer payments to those on fixed incomes

• decrease taxes and interest rates

• increase taxes or decrease government spending

• decrease taxes or increase government spending

An increase in which of the following is most likely to cause the SRAS curve to shift left?

• Input Costs

• The optimism of business firms

• Government spending

• Consumers’ incomes

Which of the following will shift the aggregate demand curve to the right?

• An increase in the government’s budget surplus

• A report that corporate earnings were lower than expected

• Increased imports caused by appreciation of the dollar

• Increased spending by businesses on computers

If the MPC is .75 the spending multiplier is

• 10

• 4

• 3

• 5

MPS + MPC = ?

• 0

• 1

• .5

• Spending Multiplier

An appropriate fiscal policy to combat a recession would be to increase which of the following?

• Interest Rates

• The sale of Bonds

• Taxes

• Government Spending

An increase in government spending will shift the

• SRAS Left

• AD Left

• SRAS Right

• AD Right

An increase in the price of oil will shift

• SRAS Left

• AD Left

• SRAS Right

• AD Right

An increase in consumer confidence will shift

• SRAS Left

• AD Left

• SRAS Right

• AD Right

An increase in worker productivity will shift

• SRAS Left

• AD Left

• SRAS Right

• AD Right