39) Which of the following represents the most expansionary fiscal policy? A) a $10 billion tax...

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39) Which of the following represents the most expansionary fiscal policy? A) a $10 billion tax cut (B) (C) D) a $10 billion tax increase a $10 billion increase in government spending a $10 billion decrease in government spending 40) Discretionary fiscal policy will stabilize the economy most when: deficits are incurred during recessions and surpluses during inflations. the budget is balanced each year. deficits are incurred during inflations and surpluses during recessions. budget surpluses are continuously incurred. A) B) C) D) 41) The crowding-out effect of expansionary fiscal policy suggests that: A) tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B) government borrowing to finance the public debt increases the real interest rate and reduces private investment. C) it is very difficult to have excessive aggregate spending in a capitalist economy. D) consumer and investment spending always vary inversely. 42) Which of the following fiscal policy actions would be appropriate if the economy is experiencing an inflationary gap? A) an increase in government spending B) an increase in taxes C) a decrease in interest rates D) an increase in the money supply 43) Suppose the economy is experiencing a recessionary gap at the current level of GDP. Which of the following fiscal policy actions would be most appropriate given this vi recessionary gap? A) decreasing interest rates B) increasing the money supply C) decreasing taxes D) a simultaneous and equal reduction in taxes and reduction in government spending 44) When current government expenditures exceed current tax revenues in a fiscal year then A) the budget has neither a deficit nor a surplus. B) the full-employment budget has a deficit. C) fiscal policy is contractionary. D) nominal GDP and real GDP are equal. (8) 39) Which of the following represents the most expansionary fiscal policy? A) a $10 billion tax cut (B) (C) D) a $10 billion tax increase a $10 billion increase in government spending a $10 billion decrease in government spending 40) Discretionary fiscal policy will stabilize the economy most when: deficits are incurred during recessions and surpluses during inflations. the budget is balanced each year. deficits are incurred during inflations and surpluses during recessions. budget surpluses are continuously incurred. A) B) C) D) 41) The crowding-out effect of expansionary fiscal policy suggests that: A) tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B) government borrowing to finance the public debt increases the real interest rate and reduces private investment. C) it is very difficult to have excessive aggregate spending in a capitalist economy. D) consumer and investment spending always vary inversely. 42) Which of the following fiscal policy actions would be appropriate if the economy is experiencing an inflationary gap? A) an increase in government spending B) an increase in taxes C) a decrease in interest rates D) an increase in the money supply 43) Suppose the economy is experiencing a recessionary gap at the current level of GDP. Which of the following fiscal policy actions would be most appropriate given this vi recessionary gap? A) decreasing interest rates B) increasing the money supply C) decreasing taxes D) a simultaneous and equal reduction in taxes and reduction in government spending 44) When current government expenditures exceed current tax revenues in a fiscal year then A) the budget has neither a deficit nor a surplus. B) the full-employment budget has a deficit. C) fiscal policy is contractionary. D) nominal GDP and real GDP are equal. (8)

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39 C Government spending will have the direct impact But the total red... View the full answer