Multiple Choice Questions: 1. Traditionally, government has used _ to influence _. a. Taxing and spending; the

Question:

Multiple Choice Questions:
1. Traditionally, government has used _____________ to influence _____________.
a. Taxing and spending; the demand side of the economy.
b. Spending; the supply side of the economy.
c. Supply management; the demand side of the economy.
d. Demand management; the supply side of the economy.
2. Contractionary fiscal policy consists of?
a. Increased government spending and increased taxes.
b. Decreased government spending and decreased taxes.
c. Decreased government spending and increased taxes.
d. Increased government spending and decreased taxes.
3. Budget deficits are created when?
a. Government spending exceeds its tax revenues.
b. Government tax revenues exceed its spending.
c. Government spending equals its tax revenues.
d. None of the above.
4. If the government wanted to move the economy out of a current recession, which of the following might be an appropriate policy action?
a. Decrease taxes.
b. Increase government purchases of goods and services.
c. Increase transfer payments.
d. Any of the above.
Using the accompanying graph, answer question 5.

5. In order for the economy pictured here to return to RGDPNR, this economy could use
a. Decreased taxes and increased government purchases.
b. Increased taxes and increased government purchases.
c. Decreased taxes and decreased government purchases.
d. Decreased taxes and increased government purchases.
6. If government policymakers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?
a. Increase consumption taxes
b. Increase government purchases
c. Reduce government purchases
d. Decrease government purchases of goods and services
7. In the short run, expansionary fiscal policy can cause a rise in real GDP?
a. In combination with a rise in the price level.
b. In combination with no rise in the price level.
c. In combination with a reduction in the price level.
d. In combination with a rise or reduction in the price level, depending on theeconomy.