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Chapter 12 Multiple Choice Questions - KEY

Chapter 12 Multiple Choice Questions - KEY - 1 Which of the...

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Chapter 12 Material 1 Which of the following was instrumental in assigning to the Federal government the basic responsibility for promoting economic stability in the U.S. economy? A. The Employment Act of 1946 B. The Tax Reform Act of 1986 C. The Ricardian equivalence theorem D. The balanced-budget multiplier
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Chapter 12 Material 2 If government wishes to increase the level of real GDP it might reduce… A. Taxes B. Its purchases of goods and services C. Transfer payments D. The size of the budget deficit
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Chapter 12 Material 3 If Congress passes legislation to make a substantial increase in government spending to counter the effects of severe recession, this would be an example of a… A. Supply-side fiscal policy B. Contractionary fiscal policy C. Discretionary fiscal policy D. Nondiscretionary fiscal policy
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Chapter 12 Material 4 Which combination of policies would be the most expansionary? A. An increase in government spending and taxes B. A decrease in government spending and taxes C. An increase in government spending and a decrease in taxes D. A decrease in government spending and an increase in taxes
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Chapter 12 Material 5 An economy is in a recession and the government decides to increase spending by $4 billion. The MPC is 0.8. What would be the full increase in real GDP from the change in government spending assuming the increase would be in the horizontal range of the aggregate supply curve? A. $3.2 billion B. $4 billion C. $16 billion D. $20 billion
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Chapter 12 Material 6 Which combination of fiscal policies would be the most contractionary? A. An increase in government spending and taxes B. A decrease in government spending and taxes C. An increase in government spending and a decrease in taxes D. A decrease in government spending and an increase in taxes
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Chapter 12 Material 7 Which is a more expansionary way for government to finance a budget deficit?
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