7) If the MPC is 0.5, then a $10 million increase in disposable income will increase...

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7) If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by A) $2 million. B) $5 million. C) $15 million D) $50 million. 8) If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will A) increase consumption by $7,500. B) increase consumption by $2,500. C) decrease consumption by $7,500. D) decrease consumption by $2,500. 10) MPC + MPS= A) 0. B) 0.5. C) 1. D) 100. 10) Higher personal income taxes A) increase aggregate demand. B) increase disposable income. C) decrease aggregate demand. D) both B and C. 11) Lower personal income taxes A) increase aggregate demand. B) decrease disposable income. C) decrease aggregate demand. D) increase transfer payments. 12) What is potential GDP? A) It is the level of real GDP in the long run. B) It is the difference between current GDP and maximum GDP. C) It is the level of real GDP in the short run. D) It is the level of GDP at which inflation is constant. 13) The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of A) automatic stabilizers. B) discretionary fiscal policy. C) discretionary monetary policy. D) automatic monetary policy. 14) Active changes in tax and spending by government intended to smooth out the business cycle are called and changes in taxes and spending that occur passively over the business cycle are called A) automatic stabilizers; discretionary fiscal policy B) discretionary fiscal policy; automatic stabilizers C) automatic stabilizers; monetary policy D) discretionary fiscal policy, conscious fiscal policy 15) Expansionary fiscal policy involves A) increasing government purchases or decreasing taxes. B) increasing taxes or decreasing government purchases. C) increasing the money supply and decreasing interest rates. D) decreasing the money supply and increasing interest rates. 16) An increase in individual income taxes spending. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases. B) government purchases. C) oil prices. D) taxes. 17) If the economy is growing beyond potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in A) the money supply and a decrease in interest rates. 18) Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion. To move the economy back to potential GDP, Congress should A) lower taxes by an amount less than $500 billion. B) raise government purchases by $500 billion. C) raise government purchases by more than $500 billion. D) lower taxes by $500 billion. E) lower government purchases by $500 billion. 19) Expansionary fiscal policy A) can be effective in the short run. disposable income, which B) causes complete crowding out in the short run. C) is never effective because of crowding out. D) can be effective in the long run. 20) In economics, money is defined as A) the total value of one's assets in current prices. B) the total value of one's assets minus the total value of one's debts, in current prices. C) the total amount of salary, interest, and rental income earned during a year. D) any asset people generally accept in exchange for goods and services. 21) The major shortcoming of a barter economy is A) the requirement of a double coincidence of wants. B) the requirement of specialization and exchange. C) that goods and services are not traded. D) that money loses value from inflation. consumption 22) Which of the following is one of the most important benefits of money in an economy? A) Money allows for the exchange of goods and services. B) Money allows for the accumulation of wealth. C) Money makes exchange easier, leading to more specialization and higher productivity. D) Money encourages people to be self-sufficiency and therefore increases economic stability. 7) If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by A) $2 million. B) $5 million. C) $15 million D) $50 million. 8) If the marginal propensity to save is 0.25, then a $10,000 decrease in disposable income will A) increase consumption by $7,500. B) increase consumption by $2,500. C) decrease consumption by $7,500. D) decrease consumption by $2,500. 10) MPC + MPS= A) 0. B) 0.5. C) 1. D) 100. 10) Higher personal income taxes A) increase aggregate demand. B) increase disposable income. C) decrease aggregate demand. D) both B and C. 11) Lower personal income taxes A) increase aggregate demand. B) decrease disposable income. C) decrease aggregate demand. D) increase transfer payments. 12) What is potential GDP? A) It is the level of real GDP in the long run. B) It is the difference between current GDP and maximum GDP. C) It is the level of real GDP in the short run. D) It is the level of GDP at which inflation is constant. 13) The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of A) automatic stabilizers. B) discretionary fiscal policy. C) discretionary monetary policy. D) automatic monetary policy. 14) Active changes in tax and spending by government intended to smooth out the business cycle are called and changes in taxes and spending that occur passively over the business cycle are called A) automatic stabilizers; discretionary fiscal policy B) discretionary fiscal policy; automatic stabilizers C) automatic stabilizers; monetary policy D) discretionary fiscal policy, conscious fiscal policy 15) Expansionary fiscal policy involves A) increasing government purchases or decreasing taxes. B) increasing taxes or decreasing government purchases. C) increasing the money supply and decreasing interest rates. D) decreasing the money supply and increasing interest rates. 16) An increase in individual income taxes spending. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases. B) government purchases. C) oil prices. D) taxes. 17) If the economy is growing beyond potential real GDP, which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply? An increase in A) the money supply and a decrease in interest rates. 18) Suppose real GDP is $12.1 trillion and potential GDP is $12.6 trillion. To move the economy back to potential GDP, Congress should A) lower taxes by an amount less than $500 billion. B) raise government purchases by $500 billion. C) raise government purchases by more than $500 billion. D) lower taxes by $500 billion. E) lower government purchases by $500 billion. 19) Expansionary fiscal policy A) can be effective in the short run. disposable income, which B) causes complete crowding out in the short run. C) is never effective because of crowding out. D) can be effective in the long run. 20) In economics, money is defined as A) the total value of one's assets in current prices. B) the total value of one's assets minus the total value of one's debts, in current prices. C) the total amount of salary, interest, and rental income earned during a year. D) any asset people generally accept in exchange for goods and services. 21) The major shortcoming of a barter economy is A) the requirement of a double coincidence of wants. B) the requirement of specialization and exchange. C) that goods and services are not traded. D) that money loses value from inflation. consumption 22) Which of the following is one of the most important benefits of money in an economy? A) Money allows for the exchange of goods and services. B) Money allows for the accumulation of wealth. C) Money makes exchange easier, leading to more specialization and higher productivity. D) Money encourages people to be self-sufficiency and therefore increases economic stability.

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The detailed answer for the above question is provided below 10 Answer C decrease aggregate demand Explanations Tax policy can affect both consumption and investment spending in the economy Tax cut fo... View the full answer