Final Exam - ECO 2013: Macroeconomics Valencia Community...

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1 ECO 2013: Macroeconomics Valencia Community College Final Exam Fall 2008 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. 2. If the MPS in an economy is 0.1, 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. 3. If the MPC in an economy is 0.8, government could shift the aggregate demand curve rightward by $100 billion by: A. increasing government spending by $25 billion. B. increasing government spending by $80 billion. C. decreasing taxes by $25 billion. D. decreasing taxes by $100 billion. 4. If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by: A. reducing government expenditures by $125 billion. B. reducing government expenditures by $20 billion. C. increasing taxes by $50 billion. D. increasing taxes by $250 billion. 5. In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of government purchases. Full-employment GDP is $120 billion. To obtain price level stability under these conditions the government should: A. increase tax rates and/or reduce government spending. B. discourage personal saving by reducing the interest rate on government bonds. C. increase government expenditures. D. encourage private investment by reducing corporate income taxes. 6. An appropriate fiscal policy for severe demand-pull inflation is: A. an increase in government spending. B. depreciation of the dollar. C. a reduction in interest rates. D. a tax rate increase.
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7. Suppose that in an economy with a MPC of 0.5 the government wanted to shift the aggregate demand curve rightward by $80 billion at each price level to expand real GDP. It could: A. reduce taxes by $160 billion. B. increase government spending by $80 billion. C. reduce taxes by $40 billion. D. increase government spending by $40 billion. 8. Suppose that in an economy with a MPC of 0.8 the government wanted to shift the aggregate demand curve leftward by $40 billion at each price level to remedy demand-pull inflation. It could: A. increase taxes by $10 billion. B. reduce government spending by $40 billion. C. reduce government spending by $5 billion. D. increase taxes by $20 billion. 9. Which of the following represents the most contractionary fiscal policy? A. a $30 billion tax cut B. a $30 billion increase in government spending C. a $30 billion tax increase D. a $30 billion decrease in government spending 10. A tax reduction of a specific amount will be more expansionary, the: A. smaller is the economy's MPC. B. larger is the economy's MPC.
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Final Exam - ECO 2013: Macroeconomics Valencia Community...

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