c only the price level will be affected d both real GDP and the price level

C only the price level will be affected d both real

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c. only the price level will be affected. d. both real GDP and the price level will be affected. Answer: c When government expenditures exceed tax receipts, the situation is called a budget a. with a negative balance. b. deficit. c. surplus. d. debt. Answer: b When tax revenues equal government expenditures, the situation is referred to as a(n) a. balanced budget. b. equivalent budget. c. equal budget. d. equilibrium budget. Answer: a The government purchases multiplier is used to determine the a. extra scrutiny government action receives. b. amount aggregate demand is affected by a change in government purchases. c. amount aggregate supply is affected by a change in government purchases. d. amount private consumption is decreased by government purchases. Answer: b The balanced budget multiplier applies when government spending and taxes change so as to a. increase the government budget deficit. b. decrease the government budget surplus. c. leave the government budget balance unchanged. d. set an increase in government spending equal to a decrease in taxes. Answer: c
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If the economy is in an equilibrium with real GDP less than potential GDP, discretionary fiscal policy could move the economy toward potential GDP by simultaneously ____ taxes and ____ government purchases of goods and services. a. raising; increasing b. raising; decreasing c. cutting; increasing d. cutting; decreasing Answer: c If an economy is in an equilibrium with an inflationary gap, policy-makers can use a. discretionary fiscal policy and increase government spending. b. automatic fiscal policy and increase government spending. c. automatic fiscal policy and cut taxes. d. discretionary fiscal policy and decrease government spending. Answer: d A decrease in taxes should be applied in a situation with a. a recessionary gap. b. a inflationary gap. c. low unemployment. d. high demand for goods and services. Answer: a A reason why discretionary fiscal policy might move the economy away from potential GDP instead of toward potential GDP is that a. economic forecasts consistently underestimate the impact of fiscal policy. b. it is difficult to know whether real GDP is above or below potential GDP. c. during a recession, politicians prefer increases in government spending over decreasing taxes. d. government programs automatically move real GDP away from potential GDP. Answer: b Automatic stabilizers are defined as a. actions taken by the President without Congressional consent to stabilize the economy. b. actions taken by an act of Congress to stabilize the economy. c. policy that stabilizes without the need for action by the government. d. discretionary policy taken to stabilize the economy. Answer: c In the short run, if the Fed wants to raise the interest rate, it a. instructs large commercial banks to sell government securities in the open market.
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