1. The American Recovery and Reinvestment act of 1009 (ARRA) was intended to sti

Question

1. The American Recovery and Reinvestment act of 1009 (ARRA) was intended to stimulate the economy and creat jobs by? a) Increasing aggreget supply b) Increasing aggregate demand c) reducing cost of production.

2. The added federal spending helped stimulate the economy - the question is, by how much? The spending multiplier tells us how much an increase in government spending translate into an increase in gross domestic product. A multiplier of 2 means a $1 million increase in spending will lead to a ? in a GDP in the short run. a)$2 million decrease b)$500,00 increase c) $2 million increase

3. There's a great deal of debate among economist about the size of the spending multiplier. The non-partisan Congressional Budget Office estimate that the spending multiplier could be as high as 2.5 or as low as 1. If the multiplier is 1, than a $1 million increase in government spending will lead to a ? in GDP in the short run. a) $1 million decrease b) $1 million increase c) $2 million increase

Explanation / Answer

1)

b) Increasing aggregate demand

2)

c) $2 million increase

3)

b) $1 million increase

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