EC140 Midterm 2 Practice Questions

Intheshortrunashiftofthe c

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Unformatted text preview: ses the AS curve to shift to the left. a E) demand shock can keep real GDP above potential output a permanently. 31) ______ 9 32) uppose the economy has a high level of unemployment and a low level S of aggregate output. Which of the following policies could the government implement to alleviate these conditions? A) n expansionary fiscal policy that increases tax rates a B) n expansionary fiscal policy that increases government purchases a C) contractionary fiscal policy that increases tax rates a D) contractionary fiscal policy that increases government purchases a E) utomatic fiscal stabilizers a 33) n important automatic fiscal stabilizer in Canada is A A) he exchange rate. t B) he marginal propensity to consume. t C) he income-tax system. t D) overnment purchases of goods and services. g E) he marginal propensity to import. t 34) he ʺparadox of thriftʺ refers to the understandable tendency of worried T people to ________ their saving, but in aggregate it causes a ________ recession. A) ecrease; less severe d B) ncrease; more severe i C) ncrease; less severe i D) ncrease; shorter i E) ecrease, more severe d 35) n the long run, aggregate demand is ________ for determining real I GDP, and the paradox of thrift ________. A) ot important; applies n B) table and important; applies s C) he most important influence; does not apply t D) ot important; does not apply n E) he only influence; applies t 36) ther things being equal, a country with a high national saving rate O may have a ________ long-run growth rate because more saving increases the ________. A) ow; unemployment and decreases wages in the long run l B) igh; wealth of people and increases future consumption h C) ow; consumption in the long run l D) igh; interest rate and encourages mor...
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