Question : 101) Consider the basic AD/AS model, and suppose there a : 1384415

101) Consider the basic AD/AS model, and suppose there is a negative output gap. If an expansionary fiscal policy is pursued and the AS curve shifts right unexpectedly, the fiscal policy may be ________, and real GDP may ________ potential GDP.

A) too weak; stay below

B) too weak; rise above

C) too strong; stay below

D) too strong; rise above

E) appropriate; equal

102) Consider the basic AD/AS model, and suppose there is a negative output gap. If an expansionary fiscal policy is pursued and the AS curve shifts leftward unexpectedly, the fiscal policy may be ________, and real GDP may ________ potential GDP.

A) too weak; stay below

B) too weak; rise above

C) too strong; stay below

D) too strong; rise above

E) appropriate; equal

103) Suppose the economy has a high level of unemployment and a low level of aggregate output. Which of the following policies could the government implement to alleviate these conditions?

A) an expansionary fiscal policy that increases tax rates

B) a contractionary fiscal policy that increases government purchases

C) automatic fiscal stabilizers

D) a contractionary fiscal policy that increases tax rates

E) an expansionary fiscal policy that increases government purchases

104) Refer to Figure 24-6. In the initial short-run equilibrium, there is ________ output gap of ________ but this gap could be closed by a ________.

A) a recessionary; 100; fiscal contraction

B) a recessionary; 200; fiscal expansion

C) a recessionary; 200; fiscal contraction

D) an inflationary; 100; fiscal contraction

E) an inflationary; 200; fiscal expansion

105) Refer to Figure 24-6. If the government takes no action to change the short-run macro equilibrium, then

A) the AD curve will shift downward until it intersects with the AS curve at point E.

B) the AD curve will shift upward until it intersects with the AS curve at point C.

C) the AS curve will shift to the left until it intersects with the AD curve at point D.

D) the AS curve will shift to the right until it intersects with the AD curve at point B.

E) the AS curve can either shift to the right or left depending on the fiscal policy.

106) Refer to Figure 24-6. The government could close the existing output gap by

A) increasing the net tax rate.

B) decreasing the net tax rate.

C) decreasing government purchases.

D) decreasing government transfer payments.

E) implementing a contractionary fiscal policy.

107) Consider Figure 24-7. At the initial short-run equilibrium, there is ________ output gap of ________. This gap could be closed by a ________.

A) a recessionary; 100; fiscal contraction

B) a recessionary; 200; fiscal expansion

C) an inflationary; 100; fiscal contraction

D) an inflationary; 200; fiscal contraction

E) an inflationary; 350; fiscal expansion

108) Refer to Figure 24-7. If the government takes no action to close the existing output gap, then

A) the AD curve will shift down until it intersects with the AS curve at point D.

B) the AD curve will shift up until it intersects with the AS curve at point B.

C) the AS curve will shift to the left until it intersects with the AD curve at point C.

D) the AS curve will shift to the right until it intersects with the AD curve at point E.

E) the AS curve can either shift to the right or left depending on the fiscal policy.

109) Refer to Figure 24-7. The government could close the existing output gap by

A) increasing the net tax rate.

B) decreasing the net tax rate.

C) increasing government purchases.

D) decreasing government transfer payments.

E) implementing an expansionary fiscal policy.

110) Suppose the economy is experiencing an inflationary gap in the short run. The advantage of using a contractionary fiscal policy rather than allowing the economy’s natural adjustment process to operate is that

A) it will reduce the upward pressure on the price level that would otherwise occur.

B) if private-sector expenditures increase on their own, the policy will stabilize real GDP.

C) it will shorten what might otherwise be a long recession.

D) it will reduce the downward pressure on the price level that would otherwise occur.

E) it will close the output gap.