36 - Chapter 18 Five Debates over Macroeconomic Policy...

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Chapter 18 Five Debates over Macroeconomic Policy MULTIPLE CHOICE 1. Fluctuations in employment and output result from changes in a. aggregate demand only. b. aggregate supply only. c. aggregate demand and aggregate supply. d. neither aggregate demand nor aggregate supply. ANSWER: c. aggregate demand and aggregate supply. TYPE: M DIFFICULTY: 1 SECTION: 18.1 2. In the fall of 2002, consumers indicated that they were less optimistic about the future of the economy. This change in sentiment  would likely a. shift aggregate demand left b. decrease output c. increase unemployment d. All of the above are correct. ANSWER: d. All of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 18.1 3. “Leaning against the wind” is exemplified by a(n) a. tax cut when there is an expansion. b. decrease in the money supply when there is a recession. c. increase in government expenditures when there is a recession. d. All of the above are correct. ANSWER: c. increase in government expenditures when there is a recession. TYPE: M DIFFICULTY: 1 SECTION: 18.1 4. If firms were faced with greater uncertainty because of concern that oil prices might rise, they might decrease expenditures on  capital. In response to this change, someone who advocated “lean against the wind” policies might advocate decreasing a. the money supply. b. taxes. c. government expenditures. d. None of the above is correct. ANSWER: b. taxes. TYPE: M DIFFICULTY: 2 SECTION: 18.1 5. Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is  insufficient to ensure full employment? a. decrease the money supply b. decrease taxes c. decrease government expenditures d. None of the above is correct. ANSWER: b. decrease taxes TYPE: M DIFFICULTY: 1 SECTION: 18.1 203
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204   Chapter 18/Five Debates over Macroeconomic Policy 6. Suppose aggregate demand fell. In order to stabilize the economy, the government might a. increase the money supply. b. increase government expenditures. c. decrease taxes. d. All of the above are correct. ANSWER: d. All of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 18.1 7. Which of the following are both policies that are consistent with trying to stabilize output when prices and output rise? a. decrease the money supply and decrease taxes b. increase the money supply and decrease taxes c. decrease the money supply and decrease government expenditures d. increase the money supply and decrease government expenditures ANSWER: c. decrease the money supply and decrease government expenditures TYPE: M DIFFICULTY: 1 SECTION: 18.1 8. In general, the longest lag for a. both fiscal and monetary policy is the time it takes to change policy. b.
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36 - Chapter 18 Five Debates over Macroeconomic Policy...

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