Question : 51) The balanced budget multiplier based the point that the : 1238211

51) The balanced budget multiplier is based on the point that the ________ multiplier is larger than the ________ multiplier so that an equal increase in government expenditure and taxes ________ aggregate demand. 

A) tax; expenditure; does not change

B) expenditure; tax; does not change

C) expenditure; tax; decreases

D) expenditure; tax; increases

E) tax; expenditure; decreases

52) The balanced budget multiplier applies when a $50 billion increase in government expenditure is financed by a $50 billion ________ in tax revenue and the balanced budget multiplier shows that in this case there is ________ effect on aggregate demand.

A) decrease; no

B) decrease; a positive

C) increase; no

D) increase; a positive

E) increase; a negative

53) If government expenditure increases by $200 billion and taxes simultaneously increase by $200 billion, then aggregate demand

A) remains the same.

B) decreases no matter what happens to aggregate supply.

C) increases no matter what happens to aggregate supply.

D) increases only if aggregate supply increases.

E) increases only if aggregate supply decreases.

54) Ignoring any supply-side effects, if government expenditure on goods and services increase by $10 billion and taxes increase by $10 billion, then real GDP ________ and the price level ________.

A) increases; rises

B) increases; falls

C) decreases; rises

D) decreases; falls

E) does not change; does not change

55) Ignoring any supply-side effects, if government expenditure on goods and services decrease by $10 billion and taxes decrease by $10 billion, then real GDP ________ and the price level ________.

A) increases; rises

B) increases; falls

C) decreases; rises

D) decreases; falls

E) does not change; does not change

56) If the economy is in equilibrium with real GDP less than potential GDP, there is ________ gap, and a fiscal policy that ________ is appropriate.

A) an inflationary; increases aggregate demand

B) an inflationary; decreases aggregate demand

C) a recessionary; increases aggregate demand

D) a recessionary; decreases aggregate demand

E) a recessionary; increases potential GDP

57) In order to help the economy recover from a recession using fiscal policy, the government can ________ so that aggregate demand increases.

A) cut taxes

B) raise taxes

C) cut government expenditure on goods and services

D) raise interest rates

E) decrease the quantity of money

58) Which of the following is an example of a fiscal stimulus?

A) decrease in government expenditure on goods and services

B) decrease in transfer payments

C) increase in taxes

D) decrease in taxes

E) none of the above

59) Suppose the economy is in an equilibrium in which real GDP is less than potential GDP. To increase real GDP, the government can use a fiscal stimulus of

A) increasing taxes only.

B) decreasing government expenditure only.

C) decreasing taxes and/or increasing government expenditure.

D) decreasing government expenditure and simultaneously increasing taxes.

E) increasing the quantity of money.

60) If the economy is in an equilibrium with real GDP less than potential GDP, a fiscal stimulus could move the economy toward potential GDP by simultaneously ________ taxes and ________ government expenditures on goods and services.

A) raising; increasing

B) raising; decreasing

C) cutting; increasing

D) cutting; decreasing

E) raising; not changing