Chapter 12 Review

Chapter 12 Review - 1. Fiscal policy is carried out...

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1. Fiscal policy is carried out primarily by: A) the Federal government. B) state and local governments working together. C) state governments alone. D) local governments alone. Answer: A 2. Fiscal policy refers to the: A) manipulation of government spending and taxes to stabilize domestic output, employment, and the price level. B) manipulation of government spending and taxes to achieve greater equality in the distribution of income. C) altering of the interest rate to change aggregate demand. D) fact that equal increases in government spending and taxation will be contractionary. Answer: A 3. If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by: A) increasing government spending by $4 billion. B) increasing government spending by $40 billion. C) decreasing taxes by $4 billion. D) increasing taxes by $4 billion. Answer: A 4. If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by: A) increasing government spending by $25 billion. B)
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Chapter 12 Review - 1. Fiscal policy is carried out...

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