Question 5 (3 points) To address an output (recessionary) gap, the appropriate f

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Question 5 (3 points)

To address an output (recessionary) gap, the appropriate fiscal policy would be:

Question 5 options:

An increase in the corporate profit tax rate.

An increase in government spending.

An increase in the payroll tax rate.

An increase in interest rates.

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Question 6 (3 points)

A requirement to have an annually balanced federal budget would mean:

Question 6 options:

That the role of taxes and transfers as automatic stabilizers would be undermined.

That there would be no more recessionary gaps or inflationary gaps.

That actual GDP would equal potential GDP every year.

That total household disposable income would be the same every year.

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Question 7 (3 points)

Economists view investment spending as which of the following:

Question 7 options:

Mutual fund investing.

Purchase of bonds.

Purchase of stocks.

Spending on physical capital.

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Question 8 (3 points)

Investment spending is primarily financed by:

Question 8 options:

Consumption of goods and services.

Import tariffs.

Domestic and foreign savings.

Taxes.

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An increase in the corporate profit tax rate.

An increase in government spending.

An increase in the payroll tax rate.

An increase in interest rates.

Explanation / Answer

5) An increase in government spending (this would boost aggregate demand)

6) That the role of taxes and transfers as automatic stabilizers would be undermined (taxes and transfers would need to be controlled)

7) Spending on physical capital

8) Domestic and foreign savings

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