03 Jun Question 1. The Keynesians would recommend
Question
1. The Keynesians would recommend
A. Higher taxes when there is excess aggregate demand
B. Lower government expenditures when there is a shortfall in aggregate demand
C .Reliance on the market rather than the government for the adjustment when an undesirable level of aggregate demand occurs
D. Lower taxes when there is excess aggregate demand
2. which of the following would cause both an increase in the price level and an increase in real output?
A. A tax hike
B. Decrease in productions cost
C. An increase in transfer payments
D.A decrease in government spending
3. Assume the economy is operating at full employment. Which of the following policy actions will allow aggregate spending to increase but will not increase the size of the government in the process?
A. Increase government spending and leave tax rates unchanged
B .Decrease tax rates and leave government spending unchanged
C. Increasing government spending and taxes by the same amount
D .Decrease government spending by more than an increase in taxes
4. If the aggregate demand increases by the amount of the recessionary GDP gap and the aggregate supply is upward sloping
A. The economy will move to full employment
B. An AD surplus will occur
C.A recessionary GDP gap will still exist
D. An inflationary GDP gap will develop
5. Assume the MPC is 0.75.The change in total spending for the economy due to $150 billion government spending increase is:
A. $75 billion
B. $150 billion
C. $600 billion
D. $750 billion
6. To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75,the government should decrease taxes by:
A. $400billion
B. $120billion
C. $30 billion
D. $40 billion
7. The fiscal stimulus associated with a tax cut is:
A. The same as the stimulus associated with an increase in transfer payment.
B. The same as the stimulus associated with a decreased in transfer payment
C .Less than the stimulus associated with the increase in transfers’ payments
D. Greater than the stimulus associated with an increase in government spending
8. Assume the MPC is 0.60, if the government cuts spending by $10billion and cuts taxes by $10 billion simultaneously, the federal budget will:
A. Not change and the aggregate demand unchanged
B. Not change and the aggregate demand will decrease by $10billion
C. Not change and aggregate demand will increase by $10billion
D. Decrease by $10billion and the aggregate demand will decrease by $10billion
9. Suppose the government decides to increase taxes by $20 billion in order to increase social security benefits by the same amount .if prices remain at the current levels, this combined tax-transfer policy will:
A .Leave aggregate demand unchanged
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