True or False:
1. Starting from an initial recession equilibrium, expansionary fiscal policy could potentially increase employment to
RGDPNR.
2. Starting from an initial recession equilibrium, a government tax increase would tend to reduce the severity of the recession.
3. An increase in government spending and/or a tax cut will tend to move the economy up along its short-run aggregate supply curve.
4. Contractionary fiscal policy has the potential to offset an overheated, inflationary boom.
5. Contractionary fiscal policy will tend to increase a current government budget deficit.
6. When an initial increase in government purchases of goods and services occurs, the ultimate increase in total purchases will tend to be greater than the initial increase.
7. If the marginal propensity to consume is two-thirds, a $6 million increase in disposable income to certain households will lead them to increase their consumption spending by $18 million.
8. The multiplier is equal to 1 divided by the marginal propensity to consume.