Inflation Unemployment and Stabilization Policies

Inflation Unemployment and Stabilization Policies
Order 5878298
Inflation Unemployment and Stabilization Policies
1. Changes made to fiscal policy would involve changes in
(A) interest rates
(B) the reserve ratio
(C) the discount rate
(D) the U.S. constitution
(E) taxation and government spending
2. Which of the following illustrates a contractionary fiscal policy?
(A) An increase in taxation and a decrease in government spending
(B) An increase in taxation and an increase in government spending
(C) A decrease in taxation and a decrease in government spending
(D) No change in taxation and an increase in government spending
(E) An increase in taxation and no change in government spending
3. Decreasing government spending while increasing the tax rate would
be the best policy for combating
(A) a recession
(B) inflation
(C) structural unemployment
(D) an expansionary fiscal policy
(E) a decreasing average price level
4. The U.S. Congress lowered taxes to aid in the recovery from a
recession. This is an example of
(A) the political business cycle
(B) contractionary fiscal policy
(C) discretionary fiscal policy
(D) nondiscretionary fiscal policy
(E) expansionary monetary policy
Inflation Unemployment and Stabilization Policies
5. A decrease in aggregate demand would be implemented by
(A) a contractionary fiscal policy
(B) no change in the price level
(C) an increase in aggregate supply
(D) a decrease in aggregate supply
(E) an expansionary fiscal policy
6. A set of fiscal policies that would counteract each other would be
(A) a decrease in government spending and no change in taxes
(B) an increase in government spending and an increase in taxes
(C) a decrease in government spending and a decrease in taxes
(D) a decrease in government spending and buying government
securities
(E) an increase in government spending and selling government
securities
Use the following diagram to answer questions 157 and 158.
7. According to the preceding diagram, the economy is at equilibrium
at Point A. Choose the best fiscal policy most appropriate to control
demand-pull inflation.
(A) Decrease aggregate demand by increasing taxes
(B) Increase aggregate demand by decreasing taxes
(C) Decrease aggregate supply by increasing taxes
(D) Increase aggregate demand by increasing government spending
(E) Decrease aggregate supply by selling government securities
8. According to the preceding diagram, the economy is at equilibrium at
Point B. Choose the best fiscal policy that would increase real GDP.
(A) Increase aggregate demand from AD2 to AD1 by decreasing
taxes
(B) Decrease aggregate demand from AD2 toAD3 by increasing
government spending
(C) Decrease aggregate demand from AD2 to AD3 by decreasing
government spending
(D) Increase aggregate demand from AD2 to AD3 by decreasing
taxes
(E) Increase aggregate demand from AD2 to AD3 by buying
government securities
9. Imagine the economy is in a recession. Which of the following fiscal
policy suggestions would most likely be recommended?
(A) Increase government spending or increase taxation
(B) Increase government spending and decrease taxation
(C) Increase government spending and increase taxation
(D) Decrease government spending and decrease taxation
(E) A and B
10. If the U.S. government wanted to increase aggregate demand by $50
billion and the MPS is 0.4, then it should
(A) increase government spending by $20 billion
(B) increase government spending by $10 billion
(C) decrease government spending by $20 billion
(D) decrease government spending by $10 billion
(E) increase taxes by $20 billion
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