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Unformatted text preview: Intro Macro Sheflin Spring 2010 Assignment 7 SUPPLEMENT EXPLANATIONS FOR THE FOLLOWING HW 7 QUESTIONS - MY EXPLANATIONS IN CAPITALS Show Feedback | Table of Contents Time Remaining: 0:59:46 Part 1 of 1 - Question 1 of 49 1.0 Points <!--000041--> A countercyclical fiscal policy would include: A. raising government expenditures and cutting taxes in times of depression. B. raising government expenditures and raising taxes in times of boom. C. cutting government expenditures and cutting taxes in times of depression. D. raising government expenditures and cutting taxes in times of boom. E. none of the above. Reset Selection POLICIES TO COUNTER (MOVE OPPOSITE) TO BUSINESS CYCLE, HENCE STIMULATE WHEN ECONOMY IS IN RECESSION/DEPRESSION, SLOW WHEN ECONOMY BOOMING AND IN DANGER OF INFLATION. A IS WHAT WE ARE DOING IN THE CURRENT RECESSION BOTH RAISE AGG D Question 2 of 49 1.0 Points <!--000042--> In correctly using fiscal policy to combat a depression, we would see the most effect from a given change in government expenditures if the government were to: A. spend more and keep a balanced budget. B. spend more and tax less. C. spend more and keep tax rates constant. D. spend less and tax less. E. do none of the above. Reset Selection Question 3 of 49 1.0 Points <!--000004--> An equal increase in government expenditure on goods and services and taxes collected at each and every level of GDP is likely to: A. leave GDP unchanged because taxes cancel out expenditures. B. increase GDP by more than the given increase, depending upon the magnitude of the multiplier. C. leave real GDP unchanged but raise prices by the amount of the new additional tax cost. D. raise GDP by that same dollar amount because the rightward shift of CC because of new taxes will not quite cancel out the upward shift of the GG component in C + I + G. E. be neutral since no unbalanced budget is involved. Reset Selection BALANCED BUDGET MULTIPLIER SINCE TAX MULTIPLIER IS WEAKER THAN GOV SPENDING MULTIPLIER (BECAUSE SOME OF THE TAX CUT IS SAVED AND NOT SPENT) AND INCREASE IN G OFFSET BY INCREASE IN T (KEEPING BUDGET BALANCED) WILL STILL HAVE A NET STIMULATORY EFFECT ON THE ECONOMY (IN THEORY) D SINCE BB MULTIPIER IS 1 Question 4 of 49 1.0 Points <!--000007--> If additional dollars of public spending are exactly matched by additional dollars of taxation in a full- employment economy, the effects are most likely to be: A. neutral with respect to prices. B. deflationary. C. expansionary. D. intermediate. E. none of the above. Reset Selection SAME AS PREVIOUS QUESTION Question 5 of 49 1.0 Points <!--000025--> When a central bank wishes to increase the quantity of money held by the public, it: A. sells bonds....
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