Chapter 33 Fiscal Policy, Deficits, and Debt Answer Key
Multiple Choice Questions
1.
The group of three economists appointed by the president to provide fiscal policy
recommendations is the
2.
Discretionary fiscal policy refers to
3.
Countercyclical discretionary fiscal policy calls for
33-2
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AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty:
01 Easy
Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
4.
Fiscal policy refers to the
5.
Discretionary fiscal policy is so named because it
6.
Expansionary fiscal policy is so named because it
7.
Contractionary fiscal policy is so named because it
8.
An economist who favors smaller government would recommend
33-4
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written consent of McGraw-Hill Education.
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
9.
If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward
by $40 billion by
10.
If the MPC in an economy is 0.8, government could shift the aggregate demand curve
rightward by $100 billion by
11.
An economist who favored expanded government would recommend
33-5
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
12.
If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward
by $50 billion by
13.
If the MPC in an economy is 0.75, government could shift the aggregate demand curve
leftward by $60 billion by
14.
Discretionary fiscal policy will stabilize the economy most when
15.
The effect of a government surplus on the equilibrium level of GDP is substantially the same
as
16.
Assume the economy is at full employment and that investment spending declines
dramatically. If the goal is to restore full employment, government fiscal policy
should be
directed toward
33-7
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
17.
Suppose that the economy is in the midst of a recession. Which of the following policies
would most likely end the recession and stimulate output growth?
18.
In a certain year, the aggregate amount demanded at the existing price level consists of $100
billion of consumption, $40 billion of investment, $10 billion of net
exports, and $20 billion of
government purchases. Full-employment GDP is $120 billion. To obtain price-level stability
under these conditions, the government
should
19.
In a certain year the aggregate amount demanded at the existing price level consists of $100
billion of consumption, $40 billion of investment, $10 billion of net
exports, and $20 billion of
government purchases. Full-employment GDP is $200 billion. To obtain full employment under
these conditions, the government should
20.
An appropriate fiscal policy for a severe recession is
21.
An appropriate fiscal policy for severe demand-pull inflation is
33-9
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
22.
In an aggregate demand-aggregate supply diagram, equal decreases in government spending
and taxes will
23.
Which of the following represents the most expansionary fiscal policy?
24.
Which of the following represents the most contractionary fiscal policy?
33–10
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written consent of McGraw-Hill Education.
B.
a $30 billion increase in government spending
C.
a $30 billion tax increase
D. a $30 billion decrease in government spending.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy
Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of
fiscal policy.
Test Bank: I
Topic:
Fiscal Policy and the AD–AS Model
25.
A contractionary fiscal policy is shown as a
26.
An expansionary fiscal policy is shown as a
27.
A tax reduction of a specific amount will be more expansionary the
28.
A specific reduction in government spending will dampen demand-pull inflation by a greater
amount the
29.
Refer to the diagram, in which Qf is the full-employment output. A contractionary fiscal policy
would be most appropriate if the economy’s present aggregate demand
curve were at
30.
Refer to the diagram, in which Qf is the full-employment output. An expansionary fiscal policy
would be most appropriate if the economy‘s present aggregate demand
curve were at
31.
Refer to the diagram, in which Qf is the full-employment output. If the economy’s present
aggregate demand curve is AD2,
32.
Refer to the diagram, in which Qf is the full-employment output. If the economy‘s current
aggregate demand curve is AD0, it is experiencing
33.
Refer to the diagram, in which Qf is the full-employment output. If the economy‘s current
aggregate demand curve is AD3, it is experiencing
34.
Refer to the diagram, in which Qf is the full-employment output. If the economy’s current
aggregate demand curve is AD0, it would be appropriate for the government
to
35.
Refer to the diagram, in which Qf is the full-employment output. If the economy’s current
aggregate demand curve is AD3, it would be appropriate for the government
to
36.
Refer to the diagram, in which Qf is the full-employment output. If aggregate demand curve AD1
describes the current situation, appropriate fiscal policy would be to
37.
Refer to the diagram, in which Qf is the full-employment output. If aggregate demand curve AD3
describes the current situation, appropriate fiscal policy would be to