Fiscal policy is government policy toward a. Taxation b. spending c. taxation an
ID: 1122258 • Letter: F
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Fiscal policy is government policy toward a. Taxation b. spending c. taxation and spending d. the money supply 9. 10. An improvement in technology would shift which of the following curves? Only aggregate demand b. Aggregate demand and short-run aggregate supply c. Only short-run aggregate supply d. short-run and long-run aggregate supply 11. Which of the following is likely to be the long-run tendency of the economy? Produce the full-employment level of output a. b. Exhibit stable prices Move up and down with the business cycle c d. Behave in an unpredictable way 12. Automatic stabilizers are components of existing fiscal policies that tend to a. Work in the same direction as the economy b. Act to reinforce recessions c. Require policy adjustments d. Work such as to decrease spending when the economy overheats and increase spending when it contracts 13. A discretionary fiscal policy is a fiscal policy that a. Involves a change in government defense spending b. Is triggered by the state of the economy c. Requires action by the Congress d. involves a change in corporate tax rates 14. An expansionary fiscal policy is A cut in taxes or an increase in government purchases b. a. An increase in taxes or a cut in government purchases An increase in both taxes and government purchases c. d. A cut in both taxes and government purchases 15. A rightward shift in the aggregate demand curve is caused by a. A decrease in taxes b. Consumer incomes falling The purchasing power of foreign currencies falling c. A decrease in government spending d. 16. The long run aggregate supply curve is A horizontal line at the current price level a. b. GDP An upward sloping line A vertical line at f C. Avertical line at actual GDP d· 17, The idea behind expansionary fiscal policy is to a. Shift aggregate demand just enough to reach full-employment output b. Shift aggregate demand just enough to stabilize the price level c. Shift aggregate demand above full-employment output d. Shift aggregate supply just enough to reach full-employment output 18. Lags a. Help reinforce the effectiveness of fiscal policy b. Make it hard to fine tune discretionary fiscal policy c. Help to automatically stabilize the economy without government interference d. Affect automatic stabilizersExplanation / Answer
9. C. Fiscal policy is a policy followed by the government on spending and taxation.
10. D. In the long run, aggregate supply is affected by technology.
11. A. Full employment of labor resources optimally.
12. D. Examples of automatic stabilizers are food stamps and other welfare programs.
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