Chapter 31 (Final Exam)

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  1. Which combination of policies would be the most expansionary?
    an increase in government spending and a decrease in taxes
  2. An economy is in a recession and the government decides to increase spending by $4 billion. The MPC is 0.8. What would be the full increase in real GDP from the change in government spending?
    $20 billion
  3. Which combination of fiscal policies would be the most contractionary?
    a decrease in government spending and an increase in taxes
  4. If the cyclically adjusted deficit as a percentage of GDP is zero one year, and there is a cyclically adjusted surplus the next year, it can be concluded that...
    fiscal policy is contractionary
  5. The length of time involved for the fiscal action taken by Congress to affect output, employment, or the price level is referred to as the...
    operational lag
  6. The crowding-out effect of an expansionary fiscal policy is the result of government borrowing in the money market that...
    increases interest rates and decrease net investment spending
  7. Current thinking about discretionary fiscal policy among mainstream economists is that is should be designed too...
    contribute long-run economic growth
  8. The public debt is the sum of all previous...
    budget deficits minus and budget surpluses of the federal government
  9. To place the public debt in perspective based on the wealth and productive capacity of the economy, it is more meaningful to...
    measure it relative to the gross domestic product.
  10. According to many economists, the primary burden of the debt is the...
    annual interest charges from bonds sold to finance public debt
  11. Which is an important consequence of the public debt of the United States?
    It transfers a portion of the U.S. output to foreign nations
  12. Greater interest charges on the public debt can lead to...
    higher taxes, and thus reduced incentives to work and invest
  13. The crowding-out effect of borrowing to finance an increase in government expenditures...
    reduces current spending for private investment
  14. Image Upload

    In which year did the fiscal policy become more expansionary?
    Year 2
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Chapter 31 (Final Exam)
2016-11-29 20:21:55
Chapter 31 Final Exam
Chapter 31 (Final Exam)
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