Assume that marginal propensity to consume is 08 and potential output is 800

Assume that marginal propensity to consume is 08 and

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153.Assume that marginal propensity to consume is 0.8 and potential output is $800 billion. The tax multiplier is:A)exactly 0.8.B)impossible to determine.C)greater than 5.D)less than 5.154.The multiplier effect of changes in government transfers is:155.If the marginal propensity to save is 0.25, investment spending is $600 million, and the government increases its transfers by $100 million, then real GDP increases by:156.Changes in taxes and government transfers shift the aggregate demand curve _____ government purchases.157.If the marginal propensity to consume is 0.1, then the tax multiplier is:Page 32
A)exactly 0.1.B)more than 10.C)less than 10.D)exactly 10.158.If the marginal propensity to consume is 0.8 and government transfers decrease by $50 million, then equilibrium GDP will decrease by:159.A cut in taxes will have the most effect on aggregate demand if it is given to:160.Discretionary fiscal policy entails:161.Discretionary fiscal policy refers to changes in:A)interest rates.B)the money supply.C)government spending or taxes to close a recessionary or inflationary gap.D)taxes to account for externalities and control pollution.162.Suppose the government increases spending to fund tuition assistance for qualified college students. Automatic stabilizers will _____ the _____ effect of the _____ in aggregate demand.163.Congress increases personal income tax rates to balance the budget. Automatic stabilizerswill _____ the _____ effect of the _____ in aggregate demand.Page 33

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