CHAPTER 12 - CHAPTER 12 1. Discretionary fiscal policy...

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CHAPTER 12 1. Discretionary fiscal policy refers to: A) any change in government spending or taxes which destabilizes the economy. B) the authority which the President has to change personal income tax rates. C) changes in taxes and government expenditures made by Congress to stabilize the economy. D) the changes in taxes and transfers which occur as GDP changes. Ans: C 2. "Discretionary" fiscal policy is so named because it: A) is undertaken at the option of the nation's central bank. B) occurs automatically as the nation's level of GDP changes. C) involves specific changes in T and G undertaken expressly for stabilization purposes at the option of Congress. D) is invoked secretly by the Council of Economic Advisors. Ans: C 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.
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CHAPTER 12 - CHAPTER 12 1. Discretionary fiscal policy...

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