Question : 9.2   Fiscal Policy at Work: Multiplier Effects 1) If the government : 1381130

 

9.2   Fiscal Policy at Work: Multiplier Effects

 

1) If the government wants to reduce unemployment, government purchases should be ________ and/or taxes should be ________.

A) increased; increased

B) decreased; decreased

C) decreased; increased

D) increased; decreased

 

2) The President of Vulcan hires you as an economic consultant. He is concerned that the output level in Vulcan is too high and that this will cause prices to rise. He feels that it is necessary to reduce output by $10 billion. He tells you that the MPC in Vulcan is 0.6. Which of the following would be the best advice to give to the Vulcan president?

A) reduce government purchases by $4 billion

B) increase taxes by $10 billion

C) reduce government purchases by $10 billion

D) increase taxes by $2.5 billion

 

3) The leader of Atlantis hires you as an economic consultant. He is concerned that the output level in Atlantis is too low and that this will cause prices to fall. He feels that it is necessary to increase output by $200 billion. He tells you that the MPC in Atlantis is 0.8. Which of the following would be the best advice to give to the Atlantis president?

A) reduce government spending by $100 billion

B) decease taxes by $50 billion

C) increase government spending by $200 billion

D) increase government spending by $100 billion

Refer to the information provided in Table 9.3 below to answer the questions that follow.

 

Table 9.3

All Numbers are in $ Million

 

4) Refer to Table 9.3. Assuming constant MPC, at income of $1,000 million, consumption is $________ million, and at income of $1,300 million, consumption is $________ million.

A) 600; 860

B) 640; 900

C) 680; 920

D) 720; 960

 

5) Refer to Table 9.3. Assuming constant MPC, at income of $1,200 million, saving is $________ million, at income of $1,600 million, saving is $________ million.

A) 150; 230

B) 160; 240

C) 170; 250

D) 180; 260

 

6) Refer to Table 9.3. The MPC in this economy is ________ and the MPS is ________.

A) 0.5; 0.5

B) 0.7; 0.5

C) 0.9; 0.1

D) 0.8; 0.2

7) Refer to Table 9.3. The equilibrium level of aggregate output is $________ million.

A) 1,200

B) 1,300

C) 1,400

D) 1,500

 

8) Refer to Table 9.3. Which of the following variables is NOT considered autonomous?

A) saving

B) planned investment

C) planned government spending

D) none of the above

 

9) Refer to Table 9.3. Suppose the economy is in equilibrium and the government increases spending by $50 million, the new equilibrium output is $________ million

A) 1,350

B) 1,450

C) 1,650

D) 1,750

 

10) Refer to Table 9.3. Suppose the economy is in equilibrium and the government raises taxes from $200 million to $220 million, equilibrium output will ________ by $________ million.

A) decrease; 20

B) increase; 20

C) decrease; 80

D) increase; 80

Refer to the information provided in Table 9.4 below to answer the questions that follow.

 

Table 9.4

All Figures in Billions of Dollars

 

 

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