AD/AS - Fiscal Policy Review

Which of the following will most likely occur as a result of an increase in labor productivity in an economy?

• An increase in output and a decrease in inflation

• An increase in interest rates and a decrease in investment

• A decrease in exports and an increase in unemployment

• A leftward shift in the short-run aggregate supply curve and a decrease in output

What fiscal policy would help aggregate demand shift out of recession?

• Increased taxes and decreased spending.

•   Decreased interest rates.

• Increased interest rates and decreased spending.

• Increased spending and decreased taxes

An increase in energy costs will most likely cause the price level and real gross domestic product to change in which of the following ways?

• Price Level Increase

  Real GDP Increase

• Price Level Increase

  Real GDP Decrease

• Price Level Increase

  Real GDP No Change

• Price Level Decrease

  Real GDP Increase

A decrease in personal income taxes will most likely cause the price level and real gross domestic product to change in which of the following ways?

• Demand Increase

  Real GDP Increase

• Demand Increase

  Real GDP Decrease

• Demand Increase

  Real GDP No change

• Demand Decrease

  Real GDP Decrease

 A decrease in aggregate demand will most likely cause the unemployment rate and output to change in which of the following ways?

• Unemployment Increase

  Output Increase

• Unemployment Increase

  Output Decrease

• Unemployment Decrease

  Output Increase

• Unemployment Decrease

  Output Decrease

The short-run aggregate supply curve is likely to shift to the left when there is an increase in

• the cost of productive resources.    

• the money supply. 

•  productivity.      

• the federal budget deficit.

What effect do low interest rates have on business investment?

• They generally stop it completely.

• They slow it down

• They encourage it

• They do not have much effect on investment

Federal budget deficits occur when

• more money is being spent on entitlement programs than has been allocated

•  the IRS spends more than it collects in taxes in a given year

• the federal government spends more than it collects in taxes in a given year

• high levels of unemployment use up tax collections

Which of the following policies would help during a period of high unemployment and low inflation?

• Decreasing the money supply to reduce aggregate demand

• Decreasing government spending to stimulate aggregate supply

• Decreasing taxes to stimulate aggregate demand

• Imposing wage and price controls to stimulate aggregate supply

If a government decides to impose a new regulation on companies that increase costs of production. it is expected that the supply curve:

• Shifts to the right

• shifts to the left

• remains constant

• none of the above