If short run equilibrium output equals 50000 and potential output Y equals

If short run equilibrium output equals 50000 and

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138.If short-run equilibrium output equals 50,000 and potential output (Y*) equals 45,000, then this economy has a(n) __________ gap that can be closed by _________. A. expansionary; decreasing taxes B. expansionary; increasing transfer payments C. expansionary; decreasing government purchases D. recessionary; increasing government purchases
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139.Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy affects ______ as well as aggregate demand and fiscal policy is _______.
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140.Automatic stabilizers are provisions in the law that imply automatic ______ in government spending or _______ in taxes when real output declines.
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141.Provisions in the law that imply automatic increases in government spending or decreases in taxes when real output declines are called:
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142.One drawback in using fiscal policy as a stabilization tool is that fiscal policy: A. affects potential output as well as planned aggregate expenditure. B. effects are frequently offset by automatic stabilizers. C. is too flexible to use to close output gaps. D. is not useful for dealing with prolonged episodes of recession.
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143.If planned aggregate expenditure in an economy can be written as: PAE = 1000 + .6 Y, what is the income-expenditure multiplier in this economy?
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144.If planned aggregate expenditure in an economy can be written as: PAE = 2000 + .9 Y, what is the short-run equilibrium level of output in this economy?
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145.If planned aggregate expenditure in an economy can be written as: PAE = 10,000 + .85 Y, what is the income-expenditure multiplier in this economy?
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146.If planned aggregate expenditure in an economy can be written as: PAE = 10,000 + .6 Y, what is the short-run equilibrium level of output in this economy? A. 10,000B. 16,666.67C. 25,000D. 75,000
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Chapter 21 Testbank Key 1.In the Keynesian model deviations of output from potential are caused by: AACSB: Analytical Skills Blooms: Understanding Frank - Chapter 21 #1 Learning Objective: 21-01 Identify the key assumption of the basic Keynesian model and explain how this affects the production decisions made by firms. Section: The Keynesian Models Crucial Assumption: Firms Meet Demand at Preset Prices
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