Chapter 11 Review Questions

Chapter 11 Review Questions - ECN 211: Spring Semester,...

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Review Questions Chapter 11 Multiple Choice ____ 1. The “Laffer curve” belongs to which of the following schools of economic thought? a. Keynesian. b. Supply-side. c. Demand management. d. Classical. ____ 2. In Keynesian theory, which of the following would be an appropriate discretionary fiscal policy to use when the economy is in a recession? a. Increased government spending. b. Higher taxes. c. Equal reductions in both spending and taxes. d. A contraction of the money supply. ____ 3. Nondiscretionary fiscal policy tends to reduce fluctuations in real GDP because: a. Congress quickly changes spending and tax revenue. b. Government transfer payments and tax revenues change “automatically” (without new legislation) as the level of real GDP changes. c. the spending and tax multipliers are constant. d. it causes budget surpluses in recessions and budget deficits when the economy is producing a full employment GDP. ____ 4. The Laffer curve shows the relationship between tax: a. revenue and tax rates. b. revenue and take-home pay. c. revenue and government spending. d. rates and the price level. e. rates and the level of real GDP. ____ 5. "Tax cuts, by providing incentives to work, save, and invest, will raise employment and lower the price level." This argument is made by the: a. Keynesian economists. b. supply-side economists. c. classical economists. d. monetarists. ____ 6. Unemployment insurance payments act as an automatic fiscal stabilizer by: a. allowing for more consumer spending during prosperity. b. keeping disposable income and consumption higher than they otherwise would be during a recession. c. causing the unemployment rate to be higher during a recession. d. allowing for less consumer spending during a recession. e. balancing the federal budget during a recession. ____ 7. During the Reagan administration, the Laffer curve was used to ague that: a. the supply-side effects of tax cuts are relatively small. b. discretionary tax cuts are unwise because they create stagflation. c.
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This note was uploaded on 04/02/2008 for the course ECON 211 taught by Professor Keithpaulson during the Spring '08 term at ASU.

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Chapter 11 Review Questions - ECN 211: Spring Semester,...

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