Question 1.1.(TCO 6) Expansionary fiscal policy is so named because it (Points : 1)
involves an expansion of the nation’s money supply.
necessarily expands the size of government.
is aimed at achieving greater price stability.
is designed to expand real GDP.
Question 2.2.(TCO 6) An economist who favors smaller government would recommend (Points : 1)
tax cuts during recession and reductions in government spending during inflation.
tax increases during recession and tax cuts during inflation.
tax cuts during recession and tax increases during inflation.
increases in government spending during recession and tax increases during inflation.
Question 3.3.(TCO 6) The crowding-out effect of expansionary fiscal policy suggests that (Points : 1)
government spending increases at the expense of private investment.
imports replace domestic production.
private investment increases at the expense of government spending.
saving increases at the expense of investment.
Question 4.4.(TCO 5) An economy’s aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the (Points : 1)
net export effect.
wealth effect.
real-balances effect.
multiplier effect.
Question 5.5.(TCO 6) Menu costs (Points : 1)
increase during recession.
decrease during recession.
are the costs to firms of changing prices and communicating them to customers.
are sunk costs and therefore should be disregarded.
Question 6.6.(TCO 6) The MPC can be defined as that fraction of a (Points : 1)
change in income that is not spent.
change in income that is spent.
given total income that is not consumed.
given total income that is consumed.
Question 7.7.(TCO 6) Dissaving means (Points : 1)
the same thing as disinvesting.
that households are spending more than their current incomes.
that saving and investment are equal.
that disposable income is less than zero.
Question 8.8.(TCO 5) Refer to the graph. Which of the following factors will shift AD1 to AD3?
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