ECON1010C_Assignment4

ECON1010C_Assignment4 - ECON 1010C Principles of...

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Page 1 ECON 1010C Principles of Macroeconomics Instructor: Sharif F. Khan Department of Economics Atkinson College York University Summer 2005 Assignment 4 Deadline: July 16, 2005 Part A Multiple-Choice Questions 1. Contractionary fiscal policy involves: A) an increase in government spending and/or a decrease in taxes. B) a decrease in government spending or taxes. C) a decrease in government spending and/or an increase in taxes. D) an increase in government spending or taxes. 2. Which of the following would not be an expansionary fiscal policy? A) Increased welfare payments to the poor. B) Decreases in federal taxes on corporations. C) A balanced budget. D) Increased government expenditures on goods and services. 3. Suppose the Japanese economy faces a recessionary gap of 120. If the mpc is 0.6 and the price level is constant, the government should: A) increase autonomous expenditures by 20. B) increase autonomous expenditures by 48. C) increase autonomous expenditures by 72. D) increase autonomous expenditures by 120. 4. Assume the mpc = 0.8, GDP = $2,000 billion, potential GDP = $2,200 billion, and the price level is constant. According to the multiplier model, the economy could achieve potential GDP if government spending were: A) decreased by $50 billion. B) decreased by $40 billion. C) increased by $50 billion. D) increased by $40 billion.
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Page 2 5. Refer to the graph above. If the economy in the graph is at point A and the mpc is 2/3, then the most appropriate fiscal policy would be: A) an increase in government expenditures of 100. B) a decrease in government expenditures of 100. C) an increase in government expenditures of 300. D) a cut in taxes of 300. Real income Real expenditures AE0 AP AE1 1050 1200 E1 E0 6. Refer to the graph above. If the mpc is 2/3, the shift from AE0 to AE1 could be explained by a: A) $50 increase in government spending. B) $50 decrease in government spending. C) $100 decrease in government spending. D) $150 decrease in government spending. 7. The multiplier model assumes all of the following except : A) financing the deficit has offsetting effects. B) the government knows what the mpc is. C) the government knows the level of potential income. D) the government can quickly change its spending and taxes.
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Page 3 8. Expansionary fiscal policy: A) has no effect on the trade deficit. B) tends to worsen the trade deficit. C) tends to improve the trade deficit. D) can improve or worsen the trade deficit depending on the nature of the particular policy. 9. Crowding out is associated with: A) a reduction in business investment resulting from an increase in government borrowing and higher interest rates. B) an increase in business investment resulting from an increase in government borrowing
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This note was uploaded on 12/08/2009 for the course ACCT 101 taught by Professor Jim during the Spring '09 term at CSU Channel Islands.

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ECON1010C_Assignment4 - ECON 1010C Principles of...

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