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WorksheetsMacroeconomics - IETP (Independent Learning Week 8) - Dr Mellisa
Total questions: 16
Worksheet time: 18mins
Fiscal policy refers to changes in
state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.
the money supply and interest rates that are intended to achieve macroeconomic policy objectives.
federal taxes and purchases that are intended to achieve macroeconomic policy objectives.
federal taxes and purchases that are intended to fund the war on terrorism.
Which of the following would be classified as fiscal policy?
The federal government passes tax cuts to encourage firms to reduce air pollution.
The Federal Reserve cuts interest rates to stimulate the economy.
A state government cuts taxes to help the economy of the state.
The federal government cuts taxes to stimulate the economy.
An increase in government purchases will increase aggregate demand because
the decline in the interest rate will increase demand.
government expenditures are a component of aggregate demand.
consumption expenditures are a component of aggregate demand.
the decline in the price level will increase demand.
Expansionary fiscal policy involves
increasing government purchases or decreasing taxes.
increasing the money supply and decreasing interest rates
increasing taxes or decreasing government purchases.
decreasing the money supply and increasing interest rates.
Refer to Figure 27-1. An increase in taxes would be depicted as a movement from ________, using the static AD-AS model in the figure above.
E to B
B to A
A to B
C to D
Refer to Figure 27-1. Suppose the economy is in a recession and expansionary fiscal policy is pursued. Using the static AD-AS model in the figure above, this would be depicted as a movement from
A to B.
C to B.
B to A.
A to E.
Tax cuts on business income increase aggregate demand by increasing
wage rates.
business investment spending.
government spending.
consumption spending.
If the economy is falling below potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in
taxes.
government purchases.
the money supply and a decrease in interest rates.
oil prices.
Which of the following is considered contractionary fiscal policy?
Congress increases the income tax rate.
The New Jersey legislature cuts highway spending to balance its budget.
Congress increases defense spending.
Legislation removes a college tuition deduction from federal income taxes.
Expansionary fiscal policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
higher; lower
lower; higher
lower; lower
higher; higher
Expansionary fiscal policy will
not shift the aggregate demand curve.
shift the short-run aggregate supply curve to the left.
shift the aggregate demand curve to the left.
shift the aggregate demand curve to the right.
Which of the following is an appropriate discretionary fiscal policy if equilibrium real GDP falls below potential real GDP?
an increase in the supply of money
an increase in government purchases
an increase in individual income taxes
a decrease in transfer payments
1. What is fiscal policy?
(a)
Distinguish between discretionary and non-discretionary fiscal policy. Refer to lecture slide.
(a)
Give two examples of non-discretionary fiscal policy. Refer to lecture slides.
(a)
Give two examples of discretionary fiscal policy.
(a)
