ECO2023_4 - 1. The purpose of fiscal policy is to a....

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1. The purpose of fiscal policy is to a. maintain price level stability. b. promote economic growth. c. achieve full employment. d. All of the above answers are correct 2. If the government's outlays are $1.5 trillion and its tax revenues are $2.2 trillion, the government is running a budget a. deficit of $3.7 trillion. b. surplus of $3.7 trillion. c. surplus of $0.7 trillion. d. deficit of $0.7 trillion. 3. The term "crowding out" relates to a. increases in the real interest rate due to government budget deficit. b. decreases in private investment because of a government budget deficit. c. an effect of a government budget deficit. d. All of the above answers are correct. 4. A decrease in government expenditure shifts the AD curve ________ and a decrease in taxes shifts the AD curve ________. e. rightward; rightward f. rightward; leftward g. leftward; leftward h. leftward; rightward 5. In the above figure, if the economy is initially at point B and taxes are raised, if potential GDP does not change then the economy will move to point a. move to point C . b. move to point A .
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c. stay at point B . d. move to point D . 6. Because of automatic stabilizers, when real GDP increases e. government expenditures equal tax revenues. f. government expenditures increase and tax revenues decrease. g. government expenditures decrease and tax revenues increase. h. the economy will automatically go to full employment. 7. An example of a fiscal policy designed to decrease real GDP is a. an increase in taxes. b. a cut in taxes. c. an increase in government expenditure. d. None of the above answers is correct. 8. When the Fed buys U.S. government securities from a bank, the Fed a. decreases the monetary base and raises the federal funds rate. b.
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ECO2023_4 - 1. The purpose of fiscal policy is to a....

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