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QUESTION 22

Suppose that the MPC is 0.7, there is no investment
accelerator, and there are no crowding-out effects. If government
expenditures increase by $30 billion, then aggregate demand

shifts rightward by $100 billion.

shifts rightward by $51 billion.

shifts rightward by $170 billion.

shifts rightward by $72.8 billion.

0.1 points   

QUESTION 23

If taxes

decrease, then consumption increases, and aggregate demand
shifts rightward.

decrease, then consumption decreases, and aggregate demand
shifts leftward.

increase, then consumption decreases, and aggregate demand
shifts rightward.

increase, then consumption increases, and aggregate demand
shifts leftward.

0.1 points   

QUESTION 24

An increase in government spending shifts aggregate demand

to the right. The larger the multiplier is, the farther it
shifts.

to the right. The larger the multiplier is, the less it
shifts.

to the left. The larger the multiplier is, the farther it
shifts.

to the left. The larger the multiplier is, the less it
shifts.

0.1 points   

QUESTION 25

Keynes argued that aggregate demand is

irrational waves of pessimism cause decreases in aggregate
demand and increases in unemployment.

irrational waves of optimism cause decreases in aggregate demand
and decreases in aggregate supply.

changes in business and consumer expectations generally
stabilize the economy.

All of the above are correct.

0.1 points   

QUESTION 26

Which of the following policies would be advocated by someone
who wants the government to follow an active stabilization policy
when the economy is experiencing severe unemployment?

increase government expenditures

decrease the money supply

increase taxes

All of the above are correct.

0.1 points   

QUESTION 27

Question: QUESTION 22Suppose that the MPC is 0.7, there is no investmentaccelerator, and there are no cro...

31. Refer to Figure 34-7. The aggregate-demand
curve could shift from AD1 to
AD2 as a result of

a decrease in net exports.

an increase in government purchases.

households saving a smaller fraction of their income.

a decrease in the price level.

0.1 points   

QUESTION 28

Refer to Figure 34-7. If the economy is at
point b, a policy to restore full employment would be

an increase in the money supply.

a decrease in government purchases.

an increase in taxes.

All of the above are correct.

0.1 points   

QUESTION 29

Refer to Figure 34-7. Which of the following is
correct?

It is possible that either fiscal or monetary policy might have
caused the shift from AD1 to
AD2.

All of the above are correct.

If aggregate demand moves from AD1 to
AD2, the economy will stay at point b in both
the short run and long run.

A wave of optimism could move the economy from point a to point
b.

0.1 points   

QUESTION 30

Question: QUESTION 22Suppose that the MPC is 0.7, there is no investmentaccelerator, and there are no cro...

Refer to Figure 34-9. Suppose the economy is
currently at point A. To restore full employment, the Federal
Reserve should

sell government bonds, which will reduce the money supply.

sell government bonds, which will increase the money supply.

purchase government bonds, which will reduce the money
supply.

purchase government bonds, which will increase the money
supply.

0.1 points   

QUESTION 31

An example of an automatic stabilizer is

unemployment benefits

a lowering of interest rates by the Fed.

a decrease in money demand.

a decrease in tax rates in response to a recession.

0.1 points   

QUESTION 32

Other things the same, automatic stabilizers tend to

raise expenditures during recessions and lower expenditures
during expansions.

raise expenditures during expansions and lower expenditures
during recessions.

lower expenditures during expansions and recessions.

raise expenditures during expansions and recessions.

0.1 points   

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