Ch.34 - Monetary, Fiscal Policy, Aggregate Demand

Which of the following is an "Automatic Stabilizer"?

• Unemployment Insurance

• Congress authorizing a $50 billion infrastructure package

• A reduction in payroll taxes

• COVID relief checks

In 1946 Congress passed what became known as the Employment Act of 1946. What was the basic purpose of the Act?

• To hold the government accountable for short-run economic performance

• To ensure that the government worked to ensure that everyone had a job

• To ensure the survival of a social safety net during hard times

• To make sure that government money was spent on American workers and American-made products

Why does the Multiplier, in practice, not necessarily produce the results that economists say it should in theory?

• "Automatic Stabilizers"

• "Crowding-Out"

• "Liquidity Preference"

• Non-Discretionary Fiscal Policy

Congress passed a $40 billion tax cut. If Americans' marginal propensity to consume is 83%, how much money should be created by the tax cut?

• Tax cuts don't have a multiplier

• $235.3 Billion

• $48.2 billion

• $48.3 billion

The Federal Reserve Bank postulates that the GDP of the U.S. economy at full employment is $6.4 trillion. The actual GDP of U.S. economy is $5.6 trillion. What is the GDP gap?

• 12.5%

• 14.3%

• -$800 billion

• -12.5%

Classical economists describe Inflation as "Too many dollars chasing too few goods." How did John Maynard Keynes define Inflation?

• Not enough goods for the money supply

• Too much aggregate demand

• Too little aggregate supply

• Short-run aggregate supply and aggregate demand beyond Long-term aggregate supply

Which of the following would increase the demand for money

• Families, fearing a double-dip recession, increase their marginal propensity to save

• Nominal GDP increases and interest rates decrease at the same time

• Nominal GDP decreases and interest rates decrease at the same time

• New immigration laws make it difficult to harvest many crops in the agriculture sector

"When interest rates are high, stocks will die." Which of the following is NOT a contributing factor to the decrease in stock prices?

• Higher interest rates increase costs to entrepreneurs and reduce profits

• Higher interest rates increase the opportunity cost of owning stocks

• Higher interest rates reduces aggregate demand, resulting in lower profits

• Higher interest rates are a disincentive for household savings

What is the result in the Aggregate if the Fed follows a tight monetary policy?

• Higher Interest Rates

  Less Investment

  Aggregate Demand Shifts inward

  GDP declines

• Higher Interest Rates

  More Saving

  Aggregate Demand Shifts outward

  GDP increases

• Lower Interest Rates

  More Investment

  Short-Run Aggregate Supply Shifts increases

  GDP increases

• Lower Interest Rates

  More Investment

  Long-Run Aggregate Supply Shifts inward

  GDP declines

According to the International Monetary Fund, in the face of recessions, poorer countries -

• Have larger automatic stabilizers and rely less on discretionary fiscal policies

• Have larger automatic stabilizers and demand more stimulus

• Have less automatic stabilizers and rely more on discretionary fiscal policies

• Have less automatic stabilizers and rely on less on discretionary stimulus